Creating and managing a budget involves several key steps to ensure financial stability and effective resource allocation. An example of financial literacy is making a monthly budget that outlines their income, expenses, and savings goals. This individual might allocate a certain percentage of their income towards savings and investments after accounting for necessary expenses like rent, utilities, and groceries.
Over time, a person’s financial literacy will help them build a strong foundation, achieve long-term financial objectives, and navigate unexpected financial challenges more effectively.
More importantly, it will show areas in your budget where expenses can be altered and provide more for debt reduction and savings.
- Here are some suggestions to get you started on the habit of following a budget:
Begin setting financial goals by defining clear objectives. These include retirement savings, paying off debt, having an emergency account, and funding potential major purchases. Measurable (amount, frequency) goals provide direction and motivation for budgeting. - Collect all relevant financial paperwork, including income sources, all expenses, all debts, and all savings and investment accounts. This step establishes a comprehensive, tangible, and touchable view of your financial situation.
- Create a spreadsheet using Google Sheets or Excel to organize by tracking income and expenses, including allocating sections for income like salary, side job, or all revenue streams versus outgoing, fixed costs like house payment or rent, utilities, groceries, transportation, healthcare, auto and home-owners insurance, variable expenses (groceries, entertainment, auto repair costs), savings, and credit card payments. We recommend you review auto and homeowners insurance at least twice a year.
- Record all monthly expenses for the rest of the year to understand spending patterns. Categorize expenses to identify areas where adjustments can be made.
- Identify and differentiate between fixed expenses (unchanging costs like rent) and variable expenses (fluctuating costs like groceries). This distinction helps prioritize expenses during budgeting and can indicate areas where savings might be available.
- Set limits for each spending category based on your financial goals and income. Allocate funds for essential needs first, then discretionary spending and savings.
- Allocate a portion of your income towards savings and investments. Aim to build an emergency fund and contribute to long-term savings goals such as retirement or education.
- Regularly review your budget to monitor progress toward financial goals and identify any overspending or underutilized funds. Adjust the budget as needed to accommodate changes in income or expenses.
Effective budgeting requires discipline and ongoing management. By following these action steps, individuals can gain better control over their finances, reduce financial stress, and work towards achieving their economic aspirations. Understanding income, expenses, and savings goals in a budget format provides a visual copy that enables you and your family to make well-thought-out decisions and fosters financial stability.
We provide all the tools and education to get you moving in a more comfortable, easier direction towards greater peace of mind, I encourage you to request a copy of Primerica’s free “The Real How Money Works” publication and schedule a complimentary Financial Needs Assessment (FNA).
Request your FREE copy today: https://therealhowmoneyworks.com/us/mahaliaboyd
Schedule an appointment: livemore.net/mahaliaboyd
Follow me on Instagram: @mahaliaboyd.
By Mahalia Boyd
UniteNews Staff Writer
