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Budgeting – It’s Not as Scary as it Sounds

Have you been putting off creating a budget because it seems overwhelming and scary? Creating a budget doesn’t mean that you have to cut out the things you enjoy or track every dollar you spend. Rather, budgeting helps you to align your spending with what you value most.

So where do you start? There are many tools available to make budgeting easier. The spending and budgeting feature of eMoney is one valuable tool offered to Treybourne Wealth clients. Using a budgeting tool, like eMoney, allows you to electronically link your spending and saving/investing accounts, and place your transactions into the appropriate categories. eMoney will recognize repetitive transactions and categorize them for you going forward. Once you have transactions categorized, you can see at a glance where your money is going. From here, you can begin evaluating your spending/saving habits and make adjustments when creating your budget. eMoney is not the only budgeting tool available – you can find several other options online. Many budgeting tools, including eMoney, offer mobile access as well, making it convenient to check in on your spending when you have a few free minutes. If you are working on a budget with another person, make sure that they have access to the tool also so communication is easy and all involved are working together.

The aim is to create a balance between meeting your needs, saving for your goals, and enjoying what’s most important to you. As you review your spending, take a look at the essentials first – utilities, mortgage/rent, food, gas, insurance, etc. This should make up around 50% of your net income. Next, make sure that you are budgeting around 20% of your net income for savings. This 20% can come from contributions to your retirement account, investment accounts, or emergency fund, depending on your individual goals. Finally, look at what you are spending on everything else – going out to eat, entertainment, shopping, etc. Look at these expenses for areas to cut back in order to reach or add to your savings goal but don’t eliminate this category all together. In order for your budget to be effective, it is important to create budget that is realistic and one that you can stick to. Allow yourself some “fun” money.

You have a budget, now what? Monitor your spending and stay on track. Many budgeting tools allow you to set alerts when you are getting close to exceeding your budget for a certain area, if certain account balances get too low, or if your credit card balance gets too high. These alerts can come in the form of an email or a push notification to your phone so you always know how you’re doing. Create some short-term and long-term savings goals to measure your progress and keep you motivated. An easy way to ensure that you are sticking to your savings goal is through the use of automatic deposits. Setting up an automatic deposit from your bank account into your investment account on a monthly basis prevents you from being tempted to spend the money elsewhere. Also, if your employer offers one, make sure you are contributing to your 401k. This small contribution can come directly out of your paycheck and is an easy way to save for retirement.

Remember, the goal of a budget is not to track every dollar you spend, but rather to ensure that you are saving, and to prioritize your spending based on what you value most. It is a great first step in working toward achieving your goals and creating a financial plan for your future.

Welcoming Timothy Voegele, CFA®, CFP®
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