BUDGETING

Budgeting is a process for tracking, planning, and controlling income and expenses. It is a process that we begin soon after we get our first spending money. Analyze your current situation, determine your goals, and develop a written plan against which you'll measure your progress.

Do the math. Add up your monthly income, then your expenses, and subtract expenses from income. The result is your monthly net cash flow. If it is positive (hopefully), you're earning more than you're spending. If not, then budgeting is not really an optional process. You must do it to avoid losing more ground financially. To the extent that you can make cash flow strongly positive, you will be able to save for upcoming needs and investments. Here are a few ideas to increase income and decrease expenses:

Increase income 

Different job, paying more or covering more healthcare expenses

Side gig, either from home or at a local business

Consignment or online sales of household items

Decrease expenses

Pay off credit cards monthly—interest is a budget killer

Review entertainment and telephone bills and reduce services

Eat at home more often

Define your goals. You might have one or more major savings needs goals in mind, but now is the time to look at all your anticipated financial needs, including your cash reserve, and determine your goals. Having a plan in place will help as you work toward your future goals.

Make a plan. Once you know where you stand financially and the goals you hope to achieve, you are in a position to design a plan. Just as with a plan that falls short of delivering on your goals, a plan that is overly aggressive relative to your resources is likely to lead to budget frustration. Keeping goals aligned with objectives is a critical part of the process and essential to budgeting successfully.

Be flexible. Flexibility is always an important ingredient in the planning process. As life's circumstances change, you will need to adjust your spending plan accordingly. The important point is that the budgeting process keeps you in charge and monitoring how these changes are occurring. Make adjustments as needed.

Budgeting is a project you can accomplish with a specific goal in mind, or it can be a life-long practice. If you need more discipline in your spending, check in on your adherence to the plan every month or two. If you are staying on track, review annually or as your goals change. Don’t view budgeting as a chore, view it as another one of the many ways you take care of yourself and your future.