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Make 2017 the Year Your Budget Shines

For many, “budget” is a four letter word. If budgeting seems difficult or unappealing to you, it may help to look at it differently. Budgeting doesn’t necessarily mean giving up everything you love and converting to a super-frugal lifestyle. Nor, is the goal to shame you into being financially responsible. Budgeting is about awareness. Once you understand where your money is going, you can design a plan that lets your money work for you instead of the other way around.

The easy part

Putting together a budget is actually pretty basic: you look at how much money you’re bringing in each month, how much is going out and where it’s going. To get started, calculate your monthly income. Be sure that you are using your “net” or “take-home” pay, and not your gross pay. Your take-home pay is your income after taxes and other deductions, like health care, 401(k), etc., have been subtracted from your pay.

The not-so-easy part
Next, add up your ongoing monthly expenses. This is often where you will procrastinate, afraid of what you’ll discover when you take a hard look at our spending. But discovery is half the battle. If you don’t know what you’re spending our money on, you can’t make positive changes. Budgeting isn’t about guilt, it’s about having enough money to pay your bills, enjoy your life, and save for the future without amassing large amounts of debt.

Once you have tallied up your expenses, you should have a pretty clear picture of where you may need to cut back on spending, and if you need to increase your income—maybe by changing jobs or taking on a second job part-time.

Don’t forget to plan for a rainy day
One important budget item that is often overlooked is an emergency fund. If your car conked out tomorrow, would you be able to pay for thousands of dollars in repairs or replacing it altogether? Or, if your spouse suddenly came down with a long-term illness and couldn’t work for several months, would you still be able to keep up with your bills?

If you have not made an emergency fund a priority, you’re not alone. According to a 2016 study by the U.S. Federal Reserve, about 46 percent of Americans said they would not have enough money to cover a $400 emergency expense. Instead, they would have to put it on a credit card and pay it off over time, borrow from friends or family, or simply not cover it at all.

You may say, I have enough money saved to cover a $400 expense. While that’s a good start, have you truly saved enough? Experts recommend that an emergency fund cover at least three months’ worth of expenses, and many recommend 6-9 months in case of a job layoff or major illness.

While saving in an emergency fund may seem like a daunting task, if you set aside a little bit at a time, your money will build over time. For example, if you set aside $100 every paycheck in an emergency savings account—assuming you get paid bi-weekly— in just six months you would have $1,300.

Make it a family effort
Research shows that over half of American parents aren’t always forthcoming when talking to their kids about money matters. However, one of the best ways to make a budget “stick” with your family is to make it a group endeavor. Talk to your kids about why budgeting is important; use concrete examples instead of vague references or financial jargon. For example, if you switched jobs last year to find a better life/work balance but also took a pay cut, discuss with your kids why you felt the change was important and discuss what expenses the family is okay with cutting back on. Often, you’ll be surprised how willing kids are to go along with a spending plan if they feel involved in the process.

View budgeting as an opportunity to teach your kids basic money saving concepts like saving money, spending less, and avoiding debt. Encourage delayed gratification by setting a family goal. Perhaps with the money you save by doing away with eating out so often or pulling the plug on cable, you can plan a trip to an amusement park this summer. Put a picture of the place your family wants to visit on the fridge as a visual reminder of why you’re budgeting—and that you’re all in this together.

References: Federal Reserve,

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