Foundations of Finance

These can be dreaded words. In reality if you create a budget that fits you and your lifestyle not only will it not be dreaded- but it will work! You will be able to keep track of your spending and manage savings. Here are some simple tips to start creating your own personal budget:

1. Gather every financial statement you can. This includes any bank statements, investment accounts, recent utility bills and any information detailing income or expenses. From these come up with a monthly average.
2. Record all of your sources of income. Record this total income as a monthly amount.
3. Create a list of monthly expenses. Write down a list of all the expected expenses you plan on incurring over the course of a month. This includes a mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings and essentially everything you spend money on.
4. Total your monthly income and monthly expenses. If your end result shows more income than expenses you are off to a good start. This means you can prioritize this excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate that debt faster. If you are showing a higher expense column than income it means some changes will have to be made.
5. Make adjustments to expenses. If you have accurately identified and listed all of your expenses the ultimate goal would be to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for a specific expense.If you are in a situation where expenses are higher than income you should look at your variable expenses to find areas to cut. Since these expenses are typically essential it should be easy to shave a few dollars in a few areas to bring you closer to your income.
6. Review your budget monthly. See what you did well and find out what you can do better on next month.