1. Create a Budget

This is the foundation of all good financial plans. Some are more detailed than others, but how else are you going to accomplish your goals if you don't know what you make, spend, and keep?

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Reasons

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You need to know what you make, spend, and keep on a monthly basis

• If you want to save more, invest more, make a major purchase, or pick up a round at the bar - how do you know you can afford it?

• If you want to put more towards your retirement or save for a house - how do you know you can afford it?

• Your rent is increasing and you need to decide if you have to move or if you can keep living where you are - how do you know you can afford it?

• There is a big misconception out there that a budget is a tool used to curtail your spending. Sure, that is one component of it.

• But a good budget does much more than that - it puts everything into neat buckets so you know exactly what you make, what you spend, and, most importantly, what you keep.

• What you make -> Seems like an easy one, right? And for the most part it is, but let's formalize this number to ensure you know exactly what you're making. Just because your salary says $100,000, doesn't mean your paycheck equals $100,000.

• What you spend -> This is the area people struggle with the most. They have thoughts about what they spend their money on, but in reality, they don't know the exact figure. You need to know where your money goes.

• What you keep -> Again, you might have a rough idea of what this number, but we want to be precise. The more accurate the number, the better off you'll be at accomplishing your financial goals.

 

It serves as a benchmark for spending

• If you think you save $1,000 per month, but one month you don't, do you know why?

• Sure, you may have weddings, unexpected house expenses, or maybe you spent too much on golf this month. This is how life is.

• But with a budget, you'll know how much you typically spend in each expense bucket and will be able to analyze your spending habits much more accurately.

• And no, I'm not saying that if your budget has you spending $100 on coffee per month that you can't spend $125. But wouldn't you want to know that information anyway?

 

You can modify as needed

• When you make a budget, you'll put your expenses into two buckets -> Essentials and Non-Essentials.

• Essentials are expenses that you have to pay for on a monthly basis (mortgage/rent, bills, gas, groceries, etc.). These are typically non-negotiable.

• Non-Essentials are the opposite - you don't have to spend your money on these (coffee, drinks, dinners, hobbies, etc.) but they are a part of your life and should be accounted for.

• A budget will allow you to monitor your spending on Non-Essentials and you can adjust as needed - "Maybe I can go out to dinner one less time per month to help increase my saving for retirement."

• Or maybe, in the most drastic of examples, you can't decrease your expenses. Maybe the only option is increasing your income (don't we all). I know this isn't easy, but seeing the hard truth on paper might be the motivation you need.

 

Tips  

I have included the budget template free of charge within this workbook!

• Update all the cells highlighted in GREEN as needed

• We offer free consultations so please book a session if you would like to walk through this with a professional.