Budgeting

  • April 20, 2021
  • By: P.T. Phan

BUDGETING

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Reasons To Budget 5 Reasons to Make a Budget

Making a budget and following it are two powerful financial habits. It’s not always easy, or fun at first. But it is one of the best steps you can take to successfully manage your finances.  There are many reasons to budget and in the long run, it feels really good to see yourself accomplishing a goal.

Reasons to Budget (There Are More Pros than Cons!)

#1 – A budget helps you gain control of your finances

Think of a budget as a financial roadmap. It will guide you to your destination. It will also reduce arguments and improve relationships because you and your family will know where you are going financially, providing a smoother ride along the way.

#2 – Budgeting helps you achieve goals

Whether it is putting money aside for emergencies, a vacation or a college education, a budget helps you devote resources to those things that you determine are most important. Having a plan also promotes well-being and reduces stress.

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#3 – A good budget keeps you honest

Documenting purchases allows you to figure out where your money is going.  It allows you to stay accountable to your goals. By keeping a budget, each dollar you spend is accounted for. That’s a powerful incentive to stay true to your good intentions.

#4 – Budgeting helps improve habits

If you spend more than you earn, you will drain your savings. And if it continues, you will take on debt.  By measuring how you spend your money, you will know for sure whether you’re headed for trouble, and you can take the steps necessary to improve your habits.

#5 – Budgeting helps you avoid debt and improve credit

By truly understanding how much it costs to be you, you can make adjustments to stop living from paycheck to paycheck. You may be able to identify ways to get out of debt and stay out of debt. By paying your bills on time and not taking on too much debt, you will take the most important step toward building good credit.

GreenPath is Here for You

At GreenPath Financial Wellness, we are working to make it easier for everyone to achieve financial health. We can help you gain a better understanding of your spending habits, and work with you to create a budget to achieve your dreams. Our financial coaches are kind and caring. We can help you understand your finances and make a plan to meet your goals. It’s free, confidential and no pressure!

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teaching children how to budget Teaching Children How To Budget

Teaching children how to budget at a young age, will be helpful for them later in life. When your child gets money as an allowance or as a gift, you can help get them started with simple budgeting concepts.

Start With Goals, Wants and Needs

Talk with your child about money and how to use it wisely. Talk about their goals for their money.  What do they want? What do they need? There may be short-term goals they can be purchased right away. They may have long-term goals that will require them to save over time. It is helpful for children to have a reminder of why they are saving and why they should not spend all of their money now.

Save, Share and Spend Method

“Save, Share and Spend” is a method for children where they set aside money toward each of these three things.

Save

When your child earns money, they should first set aside a portion for savings. The recommendation is to save at least 10% of earnings. This percentage can be increased for children because they have fewer expenses. Savings can be accumulated in many ways. Some use a jar, piggybank or even a joint bank account to gain interest. The savings account should be kept for emergencies (new bike tire) as well as longer-term goals (first car).

Share

Teaching children about charity at a young age is also useful. Allow them to research and contribute to a charity of their choice. Sharing is typically around 10%. Discuss options with your child to determine which cause they may enjoy helping. Also consider having them volunteer with that organization to see what they are actually helping. For example, it can be very rewarding for children to use money to purchase toys for a local outreach center. Then they can help pass out those items out to needy families at Christmas.

Spend

The remainder of their earnings can go toward spending. The spending category is available so your child can make purchases they choose, but remind them that additional savings will help them reach their long-term goals faster.

Start Small, and Set An Example

It is helpful for your children to see how you budget, but start small. For example, allow them to help you plan the weekly grocery shopping. Start by planning a list from sale flyers and coupons, and then stick to that list at the store. This can turn into a saving game for them.  Remember, children will learn from your example.  So telling them about budgeting is important, but it’s much more impactful if they see you following a budget yourself.

how to manage e penses How to Manage Expenses Using Simple Budgeting Guidelines


Exploring ideas on how to manage expenses? Some simple guidelines can help on your journey to financial health.

As outlined in the video above, it is helpful to look at simple budgeting guidelines, to see if they will work for you and your household.

The Place to Start

To get the process going, many people find it useful to track daily expenses for one month. Many of the people we speak with have told us that it was worth their time to keep tabs on monthly expenses because of what they uncovered.

Tracking expenses doesn’t have to be complicated – it can simply be a hand-written notebook organized into three columns that track expenses by date, total spent, and type of expense.

If you choose to track your expenses using a small notebook, make it easy by keeping it in a purse or wallet, or storing it in a handy place along with a pen or pencil.

Another tracking technique involves saving receipts from your purchases and documenting that information in a notebook or on your smartphone or computer later.

Expense Categories

Once you have your list of expenses for an entire month, it is then helpful to group certain expenses together.

Some credit cards automatically tag your purchases in categories like department store or automotive. This can make the grouping process a lot easier!

Group the expenses into categories that make sense for you – such as housing, transportation, food, medicine, debt payments, savings or other categories.

Get Started with Simple Budgeting Guidelines

Now that you tracked your daily expenses for an entire month, and have grouped those expenses into categories, the next step is all about trying out some budgeting guidelines to see if they make sense for you.

See the following monthly expenses by category, along with some suggested simple budgeting guidelines to use when allocating your expenses to monthly income:

  • Housing Expenses: A good rule of thumb is to allocate 25 to 35% of your monthly income to fixed housing costs. These are the costs that stay the same month after month, such as your rent or mortgage and other housing costs like insurance or property taxes. Housing is generally the average person’s greatest monthly expense.
  • Food/Variable Purchases: Many find it useful to spend around 20% of your monthly income on variable costs like food. Variable costs change from month to month, and might also include entertainment and clothing.
  • Consumer Debt Payments: A good rule of thumb is to use about 10 – 20% of monthly income to make monthly consumer debt payments.
  • Savings, Other Goals: Reserve about 10% of monthly income for savings, to help build an emergency fund. Then apply the remaining income to save for other goals.

Again, these are budgeting guidelines you might want to consider. Each person’s financial situation is unique.

You can always adjust these percentages to accommodate your circumstances.

Additional Resources

Following these simple budgeting guidelines might work for you. Explore these suggestions in more detail with this useful budget worksheet.

To explore other options, consider a free consultation from someone who has your interests at heart

Our NFCC-certified counselors help you begin a conversation about where you are today, and what you need to accomplish your goals.

We guide you through a process to assess your financial situation, understand your goals, and create an action plan to work toward them.

We listen with respect, offer advice and information that could help you meet your needs.

Request a Call with a Financial Expert

learn how to budget Learn How to Budget in 7 Easy Steps

ON DEMAND – VIEW NOW: Have you experienced a sudden change, such as loss of income?  Is your unemployment income set to expire? Learn how to budget with intention!

Learn how a few choices now can make budgeting each day easier.  In this webinar, we share how to:

  • Prioritize your most important expenses
  • Build a short term plan for your cash flow
  • Gain confidence over your money choices

Download our Budgeting Worksheet and the Aligning Priorities Workbook, a key resource discussed during the webinar, to get your budget started.