7 Steps in the Budgeting Process: Where did your money go and how do you plug the holes?
Do you buy whatever you want whenever you want it?
- Is your checking account drained to zero by the end of the month?
- Have you ever had a budget?
What is a budget?
Budgets are tools that help you with an action plan to help you manage your money and help you get more monetary freedom in your life. They are a tool to achieve your money goals and accumulate wealth. Budgets are not one size fits all, nor are they fixed. It’s useful to remember that budgets can change every month and can be a work in progress.
What are the steps in the budgeting process?
Budget Step 1: Organize
Start by finding a spot in your home or home office where you can spread out and not need to put away any paper and documents for as long as it takes to get the information you need. Gather your income information, pay stubs, bank accounts, check register, and other income information. Then get your bills and checking account information or other methods of payments. The ideal is six months of information. You will need a writing tablet, excel or any other computer data that you can save. You’ll also need an adding machine or smart phone calculator to add up your data.
Budget Step 2: Get read to calculate
Use a paper tablet or computer software to record first the income you made and deposited for use in six months divided by six this the average income you have or had to use.
Budget Step 3: Create expense categories
Take your expenses and categories total of six months:
Rent or house payment
Telephone or cell
Wi-Fi & cable
Insurance: car, home, or rental, Life, Health, umbrella, Long term care.
Medical & dental expenses
Cosmetics or personal
Clothing & shoes
Budget Step 4: Understand deductions
Take your employer paycheck and look at all the deductions understand what they mean. Then, determine whether you are paying enough taxes or too much.
Budget Step 5: Plan
Make a schedule of what you want to accomplish and a plan.
Budget Step 6: Where is your money going?
As you work through your spending and budget you will find the freedom to plan on paying off your debts. What did you discover? Where is your money going? Is it for a need or a want? Are there money holes you can plug?
Budget Step 7: Spend wisely
Once you have figured out your first budget you will find it will change you. Rather than spending without intention, you will question whether what you’re buying is a want rather than a need. Don’t lose hope and keep working with your budget while planning every month. It works!
You may need a Financial Coach to assist you through this process. Contact us to help you. Meyers Financial Services, Inc. can help educate you to grasp your income and cash flow as a foundation for your money management and give you peace, hope and help to build your wealth.
Book a Call today and let’s discuss your options.
Lillian Meyers CFP®, CDFA®, EA is a financial planner in Sonoma, California helping clients with Financial Coaching. She has decades of experience assisting clients in living their best life through the use of financial planning, investment management, and other sophisticated financial options.