Life Events

Building Your Budget: Start With The Basics

A budget is an estimate of income and expenses for a set period of time. Creating a budget can help you get control of your finances and achieve important financial goals, including buying a car, saving for college, purchasing a home, and providing for a family. It can also be beneficial in meeting unexpected financial challenges, such as losing a job. Honestly I know this doesn't sound fun or exciting, but budgeting will help you improve every aspect of your financial life, and the earlier you begin, the better off you’ll be.

Write down your financial goals.

Before you start evaluating how much you can actually save each month to achieve your important goals, you should consider setting some near-term financial goals. This is essential to tracking your progress. So you need to:

 

· Determine what percentage of your paycheck you would like to save.

· Decide how much money you would like to save each month or how much money you need to save in order to achieve one of your longer-term financial goals.

· Consider how much money you want to allocate to future purchases, as well as how much you want to contribute to an emergency fund and a retirement plan.

 

Whether your goal is to put away a couple of hundred—or a few thousand—dollars every year, you need to know what that amount is. Once you have a realistic idea regarding how much you’d like to save, review the steps below, which can help you determine precisely how much you actually can save.

Next Steps

 

1. Track your income for a month. Figure out how much you make per month. Think in terms of your net income, that is, the amount of money you actually take home (i.e., your net pay) after federal, state and local taxes; contributions to employer-sponsored health insurance; and so forth have been subtracted from your gross pay.

2. Track your expenses for a month. This is the most important step to budget creation. You should record every purchase you make—without exception. No dollar should escape accountability. If you bank online, it is extremely easy to track noncash expenses and debit card charges by simply exporting the information from your user login to a spreadsheet.  

3. Create spending categories. Split your expenses into luxury items and necessities. Necessities would include rent, groceries, car payments, insurance, utilities, and so on. Luxuries would include dining out, entertainment, and other unnecessary items (e.g., extra trips to Starbucks).

To be safe, you should include your saving goal as a necessary item, so you would be less likely to sacrifice saving for other luxuries. Excel is a wonderful tool for this because you can color code your expenses, making it more obvious to tell which type of expense is which.

4. Evaluate your budget. This is the final step in budget preparation. Take a good look at your expenses. Do you see numerous luxury items that you can live without? One benefit to having expenses displayed on an electronic spreadsheet is the ability to make quick and easy calculations. You can set limits on your spending based on the results of your calculations. 

 

Besides preparing yourself for big purchases later in life, your budget can help save you from going into debt in the event of an emergency that requires you to unexpectedly spend a large amount of money.

Check your budget frequently

Keep in mind that it’s important to check your budget frequently to be aware of any changes that may have occurred in your financial situation. Every three months is a good rule of thumb for tracking your spending habits. Not doing so could result in overspending, under saving, and therefore delaying your big financial goals.

What are you waiting for? Get started now!

Now that you know how valuable a budget can be to your financial future and achieving your dreams, what are you waiting for? No doubt you’ll want to begin a savings program as soon as possible. Begin by considering the steps outlined here. Our Wealth Wise Plan program would provide you with personalized financial portal to help you track, monitor and improve your budget and cash flow situation. Contact Us today!

8 Life Events that Require Financial Guidance

Almost everyone stresses over the daily obligations of financial planning, but many also neglect the significant life stages that require special attention and strategies. Here are 8 key life events that could benefit from professional financial guidance.

1. Graduating from College

College graduation marks the first major transition into adulthood. The progression from school to career is a significant milestone and the perfect time to get financial advice. Whether you or a loved one has graduated, this is also a great time to assess needs such as college debt repayment, savings strategies, or insurance.

Luckily, most recent graduates have time on their side. With the decades ahead and the power of compound interest, it’s the perfect time to have a discussion about the benefits of saving right now. The financial foundation built now will have a major impact on the rest of your financial life.

2. Marriage or Divorce

Professional finance advice is extremely beneficial at the time of marriage. Goals such as combining finances, handling credit issues or debt problems, and building a successful financial life with your spouse will be hard to establish without objective financial advice. Click here to download our helpful checklist for newlyweds.

On the other end of the spectrum, divorcees should ensure that they protect their finances. If you’re entering divorce proceedings, important tasks like updating your will, changing your insurance policies, and protecting your investment accounts need to be handled with care and are best managed by a professional.

3. Adding a Member to Your Household

The birth of a child is a miraculous event, but that new addition will bring huge financial and lifestyle changes. College funds will need to be created, wills and insurance policies need to be updated, and a whole host of new expenses will need to be managed. Make sure that your new bundle of joy is off to the best start possible by bringing in a professional.

4. Job and Income Changes

Whether you are starting a new job, changing careers, or accepting a well-deserved promotion, there are important financial considerations to address. During a job change, you’re better off with a financial planning professional who can help you minimize taxes by rolling over retirement accounts and making the most of your stock options. A professional can also help you adjust your financial plan so you start putting more money aside and preparing for a future of continued financial growth.

5. Buying and Selling Property

If you’re buying a home, a professional can help you review your situation in an effort to maximize your tax benefits, deal with capital gains exclusions and taxes, and find write-offs and deductions you might otherwise have missed. Buying and selling property is complicated, and it’s not worth tackling on your own.

6. Illness or Hospitalization

An unexpected illness or hospitalization can strike at any time, and when it does, your finances are soon to be impacted. If you find yourself hospitalized or stricken by a sudden illness, reaching out to a professional could minimize the financial impact and help you recover more quickly. A financial advisor will also help with long-term care options and disability insurance, estate planning, life insurance, and a host of other planning topics that will have an impact on your overall portfolio.

7. Inheriting Property

Dealing with an inheritance can also be complicated, hence why it made our list. If your inheritance comes in the form of a lump sum, it is important that you minimize the tax bite and address outstanding debts. If you are inheriting a retirement account like a 401(k) or IRA, you’ll definitely benefit from assistance with rollover options and investment advice.

8. Retirement

Retirement may be the most important transition in your life. From maximizing and managing benefits to developing a distribution strategy, the right professional can be an invaluable resource.

Everyone wants to feel comfortable by establishing long-term financial security, so it’s worth taking an honest look at your current financial situation and goals. Every day we take the complexity out of financial planning for our clients. We can make it simple for you too, so don't hesitate to contact us directly if you need someone to look over things with you.