Creating a system of savings that works

Brian Clouden Vice President
A great financial plan starts with a defined budget. It’s the perfect way to tell your money where you want it to go while tracking to make sure it gets there. Whether you’re trying to pay off debt or save for your dream vacation, a budget is your first step to reaching your goal. And don’t worry, you don’t have to be a professional at budgets to start your own. The main reason why most people don’t start a budget is because they feel overwhelmed with the thought of it. That’s why I’m here to help you make a monthly budget.

1) Identify your income

This might be easier for some than others. Those who get paid on a salary scale can easily find their income. It might be more time consuming for hourly workers or for people who get paid by commission. Regardless of how your monthly income is earned, you want to determine your average monthly income. For employees who are paid irregularly, it would be best to take the average of your last 6 to 12 months of income. Additionally, you want to factor in any extra funds that come your way throughout the year. This may include additional jobs, interest, dividends, social security, alimony or rental income.

2) List all of your expenses

Listings all of your expenses is the part that makes many people nervous to start a budget. When you’re finished with this section your income might be smaller than your outgoing. But remember the point of a budget is to find that out and help you control that. The best way to determine your expenses is to track everything you spend for a month. Divide each of your expenses into categories such as: mortgage/rent, utilities, car loans, credit cards, insurance, discretionary spending, etc. Be as general or as specific as you want with your categories as long as you determine your average amount of expenses for each category.

3) Set Goals

Once you get an idea of where the bottom line of your budget is, you then need to determine what your needs or goals are. If the bottom line of your budget proved that you are overspending your monthly income, you will need to find ways to cut expenses. If this is the case, the best category to begin to cutting from is your discretionary spending. This is the subcategory where you can create the most change from such as cutting back from dining out, entertainment, travel, etc. If you find yourself in surplus of monthly income, you may want to consider adding additional categories to your monthly expenses. For example, a savings account, investment account, college savings plan, etc. Treating your savings and investments as recurring expenses will allow you to slowly build for the future.

4) Track your progress

Don’t create a budget and then forget it. Once you start the budget, you’ll still need to stay on top of your expenses. Keep track of your budget on a weekly/monthly basis. It isn’t always easy to stick to your budget, but it can have excellent rewards. Knowing that you are making good financial choices will take you from living paycheck to paycheck to being able to see long term results.
For more information on building your budget plan, listen to my interview with Clay Moden on 106.5FM WYRK.
You can catch our weekly Plan.Protect.Invest. segment live on WYRK 106.5FM at 7:20am every Wednesday. Each week we will have a Sgroi Financial planner on with Clay Moden and the WYRK morning show to discuss financial topics to educate and help their listeners. Since 1971, Sgroi Financial has proudly served Buffalo, NY and the Western New York community from our West Seneca location.

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