4 Questions to Consider When Making a Monthly Budget
October 15, 2019
Crafting a monthly budget is a fantastic way to hold yourself accountable to your financial goals and stretch the capabilities of your income. While crunching numbers can be a little frustrating, the benefit of creating a personal monthly budget is that you will have an individualized plan for how you aspire to spend your money. You’ll also notice areas in your finances where your money could be capable of doing more. Largely, making a monthly budget is a matter of careful planning and consideration of your habits and goals and containing your spending so it reflects these wants.
Your life is a tapestry of different stories, journeys, and inevitably, financial histories. Making a change and adjusting how you spend your money can be tough. We’ve created a list of four questions to ask yourself as you sketch up a plan for your budget to make this process easier.
Here are some questions to consider:
1. What are your recurring expenses?
Each month, you are likely responsible for either rent, utilities, gas, transit fare, groceries, loans, and/or any other expense that is vital to your daily life. Consider mapping out what these things are and allot an amount you wish to spend on each of these items.
It might also help to audit your past finances and see how much you’ve spent historically. After taking note of this amount, adjust accordingly based on whether you’d like to increase, decrease, or maintain this figure.
2. How much would you like to save?
After you allocate money for recurring monthly costs, take note of how much is left. When considering your income, it’s a good idea to save money for a rainy day, an emergency fund, or anything you might not need money for now but might benefit from having the funds later.
Think of saving money not as having less to spend but rather, paying yourself first. If how much would you like to save? isn’t a compelling question for you, maybe you should ask yourself, how much of your money do you want to keep? and perhaps the amount you choose to save might change.
Since savings is a multi-faceted consideration, here are some sub-questions that might also be helpful to think about:
- What are you saving for?
- How much would you like to have saved in 5,10,15+ years?
- Considering your income, how much should you be saving?
- Can you afford an emergency? Can you afford several months of unemployment?
3. What can’t you budget for?
Your budget can account for foreseeable costs and your emergency fund allows for wiggle room for longer-lasting times of difficulty, but what should happen if you were, for example, to face unemployment and flooding in your home? Or you have a health emergency while also needing to travel unexpectedly? These are the occurrences you cannot budget for.
Consider combing through your budget and assessing whether you can afford a compounded moment of emergency. See if you can add to your emergency fund or even create a fund all its own. The goal of this amount of money is for you to have two methods of safety should the worst occur.
4. What do you do to treat yourself?
Now is time for the most fun part of budgeting—fun money. After you’ve taken the steps to ensure you have enough money for your needs, saved away the necessary amount for the unforeseeable, think about what you do for fun!
Money is for saving and spending. Some of that money should be spent celebrating yourself. Just because it’s a budget, that doesn’t mean you have to live a lifestyle that excludes purchases that might bring joy.
As with many of the considerations above, surveying past spending habits might help illuminate how to adjust your fun money. If you’re spending too much, consider cutting back. Keep in mind, treating yourself doesn’t mean you have to spend a lot of money. You can buy your self a gift or even take a fantastic vacation all while honoring your budget.
Your budget should be a tool that works for you. Although you are the one drawing up the figures, these numbers aren’t static. You can adjust your budget as necessary to reflect what will feel best while, also, making your financial goals come to fruition.
It’s never too early to save for retirement!
Take a look at this blog post to figure out how much you need to save now to retire comfortably.
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