Once you find your comfort zone, you can work on adjusting your finances as your income and savings needs change. They can help you sort through best ways to cover expenses and how and where to save.
Working with a financial professional can be helpful. That includes a college fund – such as a 529 savings plan – and other needs such as a car or a down payment for a house. Once your have normal needs and retirement covered, think about building other savings. You also don’t want to saddle your kids with supporting you when you get older.Ĭontribute as much as you can to a retirement account, such as a 401(k) at work, and if your employer offers matching funds make sure you’re taking advantage of what is essentially ‘free money.’ Why retirement? It’s because you can’t borrow money for retirement, but you can borrow for college. Experts recommend tucking away three to six months of normal living expenses.Īnother top priority should be saving for your retirement - yes, retirement over socking away money for your kids’ college education. A top savings priority should be an emergency fund that you can fall back on if something unexpected happens, such as a job loss, medical expense or broken refrigerator. If you have extra money at the end of the month, it’s time to concentrate on savings. Interest charges on credit card bills and things like student loans can add up, so the sooner you pay those off, the better. You’ll need to be sure to pay your bills on time – even faster if you can. If having enough to cover all your expenses is tough, you might need to cut back somewhere or find a new or part-time job. List your income, your known expenses and balance those to see where you stand. Your first priority is your daily living expenses – food, shelter, clothes for you and your kids, and paying bills.
The bottom line is how to make the most of your current income. While there is no single answer to cover everyone, there are general guidelines that can help you deal with your needs. For an easy-to-use template that also works as a budget calculator, check out this Interactive Budgeting Spreadsheet.Families face a variety of financial needs, from daily living expenses to retirement to the costs of college and other big expenditures. Like our hypothetical Rob, review your own budget to see if your spending makes sense for your goals, and adjust accordingly. Therefore, he adjusts his budget so that he’s spending less on vacations and saving more for his down payment. However, Rob’s goal is actually to save for a down payment. If his main goal was to have vacations, then this would align with that priority. After reviewing his expenses, he realizes that his money is going more towards spending on vacations than it is saving on a down payment. Once your expenses don’t exceed your income, ask yourself this second question: Do your expenses align with your budget goals? For example, let’s say Rob’s practical budget goal is to save for a down payment on a house. This will help you avoid using credit to make ends meet, which often leads to expensive debt problems.
So here’s the first budget maker question: Are you spending more than you earn? If you are, then review that master list of expenses and cut it down until your total expenses match your total income. You already know what your expenses are because you’ve been tracking them. Developing a household budget isnt just about dollars and cents its also a reflection of your values and goals. It must prevent your expenses from exceeding your income, and it must align with your practical budget goals.
With practical goals to work towards and knowing your expenses, you’re ready to prepare your budget. Overspending is a key reason why budgets fail, so all of these steps help you avoid spending more than you make. To make the process even easier, use this simple money worksheet: our Monthly Expense Tracker. Doing this will give you a good idea of your overall spending habits, and you might be surprised by what you find out. Whether you’re paying your bills, shopping online, or buying snacks at a convenience store, jot down every cent you spend into a single document. But do you know where it all goes? The best way to figure this out is simply to track your spending for a month. child tax credits, alimony or child support, investment income). You probably already know how much you earn each month and how much you might get from other sources (e.g. Once you have some practical goals in mind, it’s time to figure out how money is flowing in and out of your household. Track the Money Coming Into Your Household and Your Spending What Are Household Expenses Payments to credit cards Cell phone bills Rent or mortgage payments Gym membership monthly dues Home insurance payments.