Almost no one enjoys the process of analyzing and budgeting expenditures, but inefficient and wasted expenditures can be major impediments to accomplishing your financial goals. It is difficult to manage your money if you don’t know how much you have or where it is going.  Consider these steps when developing your budget: 
  1. Identify how you are spending your income. Review an annual period so you determine regular monthly expenses as well as irregular, periodic expenses, such as insurance premiums, tuition, and gifts. Much of the information can be found by examining canceled checks, credit card receipts, and tax returns. Total expenses in categories that make sense for your lifestyle. If you can’t account for more than 5% of your income, take a closer look at your cash purchases. Keep a journal tracking every penny you spend for at least a month. 
  2. Evaluate your expenditures. If you find it tough to find money to save, critically review your expenditures. Consider these tips: Find ways to save at least 10% of your income. Almost all expenditure categories offer potential for savings. With essential expenses with fixed amounts, such as your mortgage, taxes, and insurance, you may be able to refinance your mortgage, find strategies to help reduce taxes, or comparison shop your insurance to reduce premiums. Essential expenses that vary in amount, such as food, medical care, and utilities, can usually be reduced by altering your spending or living habits. For instance, you can actively shop for food with coupons, exercise to get in better health, or put energy saving light bulbs in the house. Discretionary expenses, such as entertainment, dining out, clothing, travel, and charitable contributions, typically offer the most potential for spending reductions. Dining out four times a week? Reduce it to two, go to less expensive places, and save the difference. Limit the use of your credit cards, especially if you’re not paying the balance in full every month. Not only do credit card balances carry high interest charges, but credit cards tend to encourage impulse spending. Use cash or a debit card, which automatically deducts purchases from your bank account. Resolve not to purchase impulse items or items over a certain dollar amount on your first shopping trip. Go home, think about it for a couple days, and then go back to purchase the item. Often, you’ll decide you don’t really need it. Delay the purchase of large items. For example, instead of purchasing a new car every two or three years, keep your car for four or five years. If you’re really serious about reducing expenses, consider moving to a less expensive house. Not only will you reduce your mortgage payment, but you will save on other costs. 
3. Prepare a budget to guide future spending. You may want to start by setting a budget for a couple months, tracking your expenses closely over that time period. You can then fine tune your budget for an annual period. Some tips to consider include: Don’t include income in your budget that is uncertain, such as year-end bonuses, tax refunds, or gains on investments. When you receive that money, just put it aside for saving. Set up enough expenditure categories to give you a good feel for your spending patterns, but not so many that it becomes difficult and time consuming to monitor your progress. Make your budget flexible enough to handle unforeseen expenditures. Nothing goes exactly as planned, and your budget should be able to deal with emergencies. Be sure to include large, periodic expenditures, such as insurance premiums or tuition. Don’t be so rigid that your family is afraid to spend any money. Everyone in the family should have a reasonable allowance. Find ways to make the savings component of your budget happen automatically. Get the money out of your bank account and into an investment account before you have a chance to spend it. The money you have available for saving is a direct result of your spending habits. Use a budget to control your spending so you can maximize your savings. Please call if you need help with this process.