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Budget Creating 101

 

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Building a budget, especially when dealing with multiple credit/debt/income sources, can seem like an uphill battle. Don’t fret! Minor planning can go a long way, and here are 6 tips to help you get started.
 

1. Create Your (spending) Plan

Where’s your money going? If you have trouble keeping up, perhaps it’s time to create a simple plan to track your expenses. We’ll walk you through the first few steps to make it happen. Here’s a basic budget worksheet to help you get started.

Here's a basic Budget Worksheet to help you get started.

 

2. Your total earnings

Start small. Look at your total gross income over a period of a single week or month, and tally it out. If you’re using the budget worksheet, add your totals to the “gross income” section.
 

3. Calculate Expenses

What expenses do you have during the same time period? For example: mortgage, insurances, car payments, electric, cable, etc. [If you using the Budget Worksheet, record your total bills, payments and purchase amounts in the sections labeled Mortgage and debt, Utilities, Food and General Expenses, Insurance, Home maintenance, medical, childcare, etc.]
 

4. Determine Net Income

Subtract your expenses from your earnings. Here you’ll find net income.
 

5. Account for Unexpected Expenses

Begin forecasting by allowing yourself a cushion for spending.
 

6. 50-30-20 Rule

By now you’ve got a rough estimate of where your money is going, but perhaps you’d like a more detailed overview of your financial health. Some financial analysts suggest the 50/30/20 Rule on after-tax income.


Let's take the next step and begin analyzing your money management!

Spend 50% on must haves
Ensure that “must-have” expenses (food, shelter, necessary bills) do not total more than 50% of your after-tax income.  In some cases, necessary payments can exceed 50% of income.  It may take time and sacrifice, but reducing this ratio is important for a balanced budget.(Not sure what a necessary payment is? We've outlined several in our budget worksheet for you.

Spend 30% on wants
Self-explanatory, though it’s important to note that some recurring bills (gym or club memberships, for example) can be considered “wants.” Spending 30% on wants may not be possible on many budgets; however, it is important to invest time and resources on yourself to be happy.

Allocate 20% for savings/debt repayment
The remainder of your after-tax income is free for savings and/or debt repayment.
Note: These figures can be reallocated if debt payments are substantial.


Looking for additional financial advice? Visit Horizon Bank online now or contact us today at 888-873-2640.

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