What is a budget? This is a word we all know and use, but how accurately is it being utilized?

A budget is a list of all planned income and expenses whether monthly, weekly, etc. Documenting your budget, whether on paper or digitally, truly helps you manage your money and how you spend it. By creating a budget and sticking to it, you are able to manage money in much simpler terms. By simplifying just this aspect of life, you will realize how much stress you have decided to let go of.

 The main purpose to creating a budget is to enable you to set and achieve financial goals. The purpose of documenting goals is fairly simple: progress is viewed easier when documented. Positive progress always promotes positive thoughts and emotions towards the self.

Financial goals can be both long-term and short-term. It is best to set both and enjoy attaining them. Remember to set attainable goals! There is nothing more disconcerting than not seeing progress. Why make yourself feel bad? Set realistic and appropriate goals for now and set more difficult goals for long-term achievements. Remember that baby steps are more productive than no steps. Short-term financial goals should be goals you would like to achieve within the next 12 months while long-term goals can take longer than a year. Long-term financial goals require enough discipline to see them through; otherwise they can never become a reality. 

Setbacks happen to everybody, do not let them discourage you!! Your main goal at this point is to get back on track as soon as you can.

 Creating a successful budget means you fully understand what your monthly income is. There are two forms of income when it comes to the details: gross and net. Your gross monthly income is the total sum you receive before having to pay for federal income taxes, social security taxes, medicare taxes, state income taxes, county taxes, and anything else that is deducted. Your net monthly income is the true monetary amount to actually make it to you. Your net monthly income is the crucial number for an accurate and successful budget. 

The next category you must take into account is monthly expenses. There are fixed expenses, variable expenses, and periodic expenses. Fixed monthly expenses are expenses incurred every month for the same dollar amount every month; examples would include a mortgage, rent, car payment, etc. Variable monthly expenses are expenses incurred every month for a variable dollar amount every month; examples include a utility bill, groceries, fuel, etc. Periodic monthly expenses are those sudden cases that you sometimes wish you anticipated better; examples include car repairs, gifts, medical expenses, unexpected maintenance issues, etc. 

Common sense dictates that monthly expenses should be lower than your net monthly income. If this is not the case, you must find a way to reduce your expenses or increase your net monthly income.

Documents that you should keep track of and keep organized include: bank records, credit card statements, bills, pay stubs, federal and state income tax returns, investment information, retirement account records, insurance policies, medical records, tax deduction paperwork, and other income.

 Differentiate between wants and needs when creating a budget and stick to it… you will be much happier in the long run. Each individual is different… make sure you are doing what is best for your future and have the discipline to see things through. A winning attitude breeds positivity and better decisions.

 Check back for my next post on Investment Options in Today’s Financial Market.