Planning Ahead

Credit Education isn’t just about products and services.  Some of us just struggle with the day-to-day basics of credit and budgeting — especially those of us who live pay check to pay check or those of us who are new to the work force.  A budget can help you pay your bills on time, cover unexpected emergencies, and reach your financial goals—now and in the future. Most of the information you need for your budget is already at your fingertips.

CREATE YOUR BUDGET

1.  QUESTION YOUR NEEDS AND WANTS

What do you want? What do you really need? Evaluate your current financial situation and look at the big picture. Make two lists – one for needs and one for wants.  Involve your household in the discussion.

As you make the list, ask yourself:

• Why do I want it?
• How would things be different if I had it?
• What other things would change if I had it? (for better or worse)
• Which things are truly important to me?
• Does this match my values?

2.  SET GUIDELINES

We all have different budgets based on our needs and wants. The Building a Budget chart below shows some guidelines on how much should go toward different expenses. You may need to make adjustments for a daily coffee fix or annual vacations, but remember to subtract amounts from other areas if you do.

3.  ADD UP YOUR INCOME

To set a monthly budget, you need to know what’s coming in. Make sure you include all sources of income such as salaries, interest, pension, and any other income sources.  It’s also important to note when those deposits are occurring.

4.  ESTIMATE EXPENSES

The best way to do this is to keep track of how much you spend each month along with when your bills are due.  Categorize spending depending on your needs and wants.

5.  FIGURE OUT THE DIFFERENCE

Once you’ve created your budget, keep records of your actual income and expenses. This keeps you aware of the difference between what you budget and actually spend.

6.  TRIM DOWN

Once you start tracking, you may be surprised to find you spend hundreds of dollars a month on eating out or other flexible expenses. Some of these are easily trimmed.  Cutting back is usually a better place to start than completely cutting out. Be realistic. It will help you to be better prepared for unexpected costs.

BUILD A BUDGET

This chart shows some rough guidelines on how much of your income should go toward different expenses. If you live in an area where transportation is higher than normal or rents/mortgage are higher, you may need to make adjustments. Also, if you would like to add a section for gifts, or something else, then you’ll need to subtract from another area.

There are many tools available to help you budget.  One tool is myFinances, First South Bank’s online financial management tool.  It makes it easy to access and monitor all your accounts, not just First South’s, on one easy-to-understand dashboard.

Today’s blog piece is contributed by Meg Howdy, Training Director.