A common new year’s resolution is to develop a financial plan for the year and stick to it. But like all resolutions, that can be much easier said than done.
To develop a financial plan, you’ll need to create a budget. By creating a budget you can easily record and track your income and expenses each month. The secret to creating a good budget is to be diligent with recording each of your expenses and to review it on a regular basis to guarantee you are staying on track to meeting your financial goals.
What is your income?
The first step to creating a budget is to total your net monthly income- that is the money you take home each month after taxes, social security and automatic deductions such as your 401 (k) and healthcare deductions. Your income may also include tips, child support or investment income.
What are your monthly expenses?
The next step can be more complex. You’ll need to track all of your monthly expenses. This includes fixed expenses such as a car payment, phone payment, etc. and variable expenses like entertainment, vacation, and shopping. It helps to group your expenses into categories so you can have a holistic view of your month’s expenses.
What are you saving?
Once you have recorded your month’s income and expenses- simply subtract expenses from your net income to see how much you are saving each month. If you want to increase your savings, review the month’s expenses to see which costs you could easily do without. Can you do without your morning coffee run? Can you cut back on shopping costs? Finding ways to cut expenses may not be easy, but may be necessary to meet your financial goals.
By creating a budget and sticking to it to you can be in control of your finances achieve your financial goals.