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Budgeting

Budgeting is about two main goals — staying in control and seeing the big picture. If your budget is giving you the ability to accomplish these goals, then you’re getting the job done! 

To make a budget that works for you, follow a step-by-step process. Take a look at the Seven Steps to Building a Solid Budget worksheet.

Things to Know
  • Use a budget to plan for how you want to spend and save your money to reach your goals.
  • Set clear financial goals that give you purpose in prioritizing your spending.
  • Try journaling your day-to-day spending. Small expenses add up quickly.
  • Expect the unexpected. Emergency expenses are one of the biggest budget busters.
  • Use mobile banking to check your daily spending.
  • Set Goals
    Knowing Your Destination

    To create a budget that really works, you have to start by knowing where you want to end up. Your goals help you see end results clearly and specifically. Here’s an example:

    • Goal: Save at least $750 for holiday expenses.
    • Time Frame: 12 months until the holidays.
    • Plan: Cut back on lunches and dining out = $15 a week
    • Result: $15 a week x 52 weeks = $780!
    Creating Goals You Can Reach

    Follow this goal-planning method to develop both short-term (reachable within one year) and long-term goals (reachable in more than a year):

    1. Write down each of your short- and long-term goals.
    2. Prioritize each goal.
    3. Determine the total cost of each goal.
    4. Determine when — in number of months — you would like to achieve each goal.
    5. Divide the cost by the number of months to determine how much you need to save each month to achieve the goals.
    Goals as the Focal Point

    As you develop your budget, keep your goals as your focal point. Seeing the connections between your spending and its effect on your goals will help you stay disciplined. Understanding the benefit of expense adjustments in relation to your goals will help you feel more positive. Seeing real progress toward the things that are truly important to you will keep you motivated.

    A great tool to help you get started is the Reaching Your Financial Goals worksheet.

     
  • Build It

    Building a budget doesn’t have to be complicated. There are many ways to put together an effective budget that will help you reach your goals. Remember, a budget should be your plan for how you spend and save your money. If it helps you stay in control and see what’s on the horizon, it will get the job done!

    Consider these main elements when building your monthly budget:

    Income (+ )
    Amount
    Note
    IncomeSocial Security, retirement, pension, wages, tips, benefits, etc.
    Amount$________
    Use take-home pay for planning purposes.

     

    Fixed Amount Expenses (-)
    Amount
    Note
    Fixed Amount ExpensesPayments are the same each month — rent, mortgage, car payment, insurance, etc.
    Amount$________
    Learn more with a calculator to compare renting vs. buying a home.

     

    Variable Expenses (-)
    Amount
    Note
    Variable ExpensesAmount changes with amount of use — gas, electric, food, cell phone, clothing, entertainment, etc.
    Amount$________
    Use cost comparison sites such as lowermybills.com or pricegrabber.com.

     

    Periodic Expenses (-)
    Amount
    Note
    Periodic ExpensesDon't occur every month — holidays, camps, insurance, back-to-school, etc.
    Amount$________
    Review the Stay on Track tab for tips and advice.

     

    Check out the Income & Expenses Worksheet to put together a detailed comparison of your income and expenses for one month.

     
  • Stick to It

    In one sense, budgets are a lot like diets. They only work when you stick to them. And if you stick to a budget, just about any one will work. So this begs the question, “How do you stick to a budget?” The answer might not seem to be so simple. But then again, simplicity might be what it really comes down to.

    Keep it Simple

    Keeping your budget simple is by far the best way to make it easy to stick to. Here’s a great way to keep it simple and make a budget in four easy steps:

    1. Step One: Get a small notebook and dedicate each page to the following elements of your budget:
      • Take home pay
      • Monthly expenses
      • Spending plan
    1. Step Two: Determine your take home pay for one month including dates paid.
    1. Step Three: Write down all your monthly expenses — fixed, variable, and periodic.
      • Fixed: stays the same each month, e.g., mortgage or rent payment.
      • Variable: monthly purchases that differ in amount, e.g., groceries and gas.
      • Periodic: expected and unexpected expenses that are not due monthly, e.g., taxes and home repairs.
    1. Step Four: Develop a payment and spending plan.
      • Arrange the due dates of your monthly bills from first to last.
      • Calculate weekly spending needs — groceries, gas, and variable expenses.
      • Determine your pay dates monthly.
      • Match bills and expenses to coincide with your income. Consider changing due dates if necessary.

    It’s also helpful to schedule a specific time every week to monitor your spending to see whether or not you are sticking to your budget.

    Check out Sticking To It for more tips to help keep you on track.

     
  • Stay on Track

    Keeping track of information about your spending, saving, and borrowing will not only help you keep up with your plan, but maintain your peace of mind as well.

    View An Effortless System for tips on how to create a bill paying and tracking system.

    Your “Money Space”

    Try to find a quiet place where you can get away from other day-to-day distractions and just focus on finances. It can be as simple as a desk in the family room or a corner of your bedroom. Stock it with supplies such as pens, paper, stapler, filing containers or a filing cabinet, and a box for incoming mail.

    Money Worksheets

    Having consolidated records for each aspect of your personal finances can make a big difference — savings, investments, insurance, goals, loans, credit cards, medical, payments, etc. The Money Worksheets document will help you organize and track critical areas of your personal finances in one place.

    Your Cash Flow

    With odd pay cycles, multiple due dates, and automatic deductions, we also need a tool that can help us see ahead and prepare for upcoming expenses. Consider using the Payment Calendar or a program to see the timing of your income and expenses.

    Day-to-Day Expenses

    A spending area to really look at is day-to-day spending. This is one of the most overlooked areas when it comes to personal finances. Items that you purchase regularly for only a few dollars can really add up over time. Consider that purchasing coffee every day from a coffee shop for $3.00 will add up to over $1,000 in one year!

    Journaling

    Simply take a notebook or piece of paper and make spaces for recording out-of-pocket expenses for each day of the week. At the end of one week, add up everything and see what the damage is. The Spending Journal tool will help you get started.

    Using Lists

    Another way to gain control over your spending is through the effective use of lists. Shopping with a grocery list, in particular, is beneficial as there are so many opportunities for temptation and unplanned spending at a grocery store. Instead of creating a list for each trip to the grocery store, consider making an ongoing list of the items that you purchase on a regular basis. We’ve put together a My Ongoing Grocery List tool you can use.

     
  • Avoid Overdrafts

    The primary method to help ensure that we keep from accidentally overdrawing our account is “balancing.” Balancing means that we keep track of the money that goes in and out of our account and regularly compare the difference online or with our statement. Follow these simple steps to balance your account:

    1. Locate the balance shown online or on your statement.
    1. Look for withdrawals you made that do not appear online or on your statement.
      • Subtract these from the balance shown online or on your statement.
    2. Look for deposits you made that do not appear online or on your statement.
      • Add these to the previous amount calculated.
      • Remember! Funds availability may vary by the type of check or how you deposit it.
    3. Compare to see where there might be differences.
    1. Look for items that might not have been recorded that may account for the difference.

    Example:

    Step
    Detail
    Balance
    Step 1
    DetailAccount balance online/statement
    Balance$750.00
    Step 2
    DetailSubtract amount of withdrawals not appearing
    Difference =
    Balance-$125.00
    $625.00
    Step 3
    DetailAdd amount of deposits not appearing
    Actual balance =
    Balance+$70.00
    $695.00
    Step4
    DetailBalance in my records =
    Difference =
    Balance$725.00
    $30.00
    Step5
    DetailItems not recorded:
    Debit card payment pending =
    Balance$30.00

    Additionally, it’s important to consider these helpful safeguards to help avoid an overdraft and surprise fees:

    Safeguard
    How it Works
    SafeguardDirect deposit
    How it Works Money is received faster. Saves time in going to the bank to ensure you have enough funds in your account.
    SafeguardCushion
    How it WorksMaintain a certain amount of money in your account as a cushion — $100, $200, etc. — so your account doesn’t get close to $0.
    SafeguardSavings transfer
    How it WorksAlso keep a cushion in your savings account as a backup to that first cushion. You can transfer money into your checking account if needed. Services like CheckOK can do this automatically.
    SafeguardOnline and mobile banking
    How it WorksCheck your balance anytime, anywhere. Don’t forget about recent transactions that haven't appeared yet when determining what’s safe to spend. These are called pending transactions.
    SafeguardAlerts
    How it WorksSet up alerts on your accounts that notify you when your balance gets below a specific threshold. You can set up account alerts with ESL online banking or through text message banking.
    SafeguardOverdraft services
    How it WorksConsider an overdraft protection service that allows you to link your account to a line of credit or savings account to help cover any overdrafts.