The best way to improve anything is to track progress to provides a direct comparison from the past to the present. Creating a budget or a spending plan is no different. Tracking where your money is coming in and going out is the best way to measure your current financial situation. The first step to this process is to think about your financial goals.
Many people may find taking a good, hard look at their finances to be a difficult task. Starting with your goals can be a great way to get motivated. The easiest place to start is with your short-term goals. These include large expenses that you want to afford within a couple years such as renovations to your home or traveling. Next are your long-term goals, which are more along the lines of paying off a mortgage or planning for retirement.
Identify Your Current Budget
After you have set your goals, you then want to identify your monthly income and expenses. This will help you understand how much money you are saving or overspending every month. You can even go one step further and map out a whole year’s worth of cash flow to account for annual items that do not occur every month. This could include income items such as bonuses or tax refunds as well as expenses such as holiday shopping or vacations.
Once the full picture of your finances is complete, you can then start to see if you are on track to meet your short-term and long-term goals. If you are not generating enough profit every month, the quickest and easiest way to bridge this gap is to reduce your expenses. This is where you should think about what expenses are most important to you and which ones you can live without. While doing this, you still want to keep money reserved for activities you enjoy so that you can stay driven throughout the budgeting process.
The idea behind a spending plan is to think about what you want to afford in the future so that you can save today to make it happen. If you have any questions about developing a plan, call us at 513-241-8313 or click here to contact us. We look forward to hearing from you.