How To Develop a Budget You Can Live With

I have a 90-year-old aunt who is afraid to go to the doctor because she doesn’t want to get bad news. The same thing might be said about building a budget.

The word budget is about as exciting as the words diet or discipline. It is not a word we associate with anything fun and is often associated with enjoying life less.

But it doesn’t have to be that way. A budget is nothing more than an assessment of your lifestyle cost broken down into its components. It is also essential that it be a lifestyle that you wand is therefore about maintaining something you’re already happy with.

Start by identifying your income vs expenses. Since just about everyone banks online the easiest thing to do is go back through your statements and pick out your regular and recurring expenditures (make sure to note how frequently these occur for example monthly versus annually) and put them into categories. There are online banking tools that can assist here but if you prefer there are tools like Ynab and  Mint that can compartmentalize these for you.   Then budget for unexpected items, for example, auto or home repairs.  You may also want to create a separate category for medical expenses. The goal is to compartmentalize every single expenditure whether it is regular and recurring or unexpected. Lastly, create a special category for savings and investments whether you do this on your own or through a company-sponsored retirement plan, or both. If all this is done successfully you will have a very good idea of what life costs.

Then compare what you find to your income. If you find your lifestyle is less than your income congratulations you’re not only living within your means but building towards a prosperous future. If, on the other hand, your lifestyle is larger than your income consider going back through your budget and making some choices. Some of these might be tough but they are necessary to financial health and stability.

Regardless of what you find knowing where you stand is always preferable to not knowing. It is the first step towards a more peaceful financial present and future. As always we at Eagle West Group stand ready to help you in whatever way is necessary.

Meanwhile, some additional comments to consider:

https://www.fool.com/investing/2018/04/21/budgeting-101-how-to-start-budgeting-for-the-first.aspx

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