The thought of creating a budget, or even thinking about a budget causes some people serious anxiety.  Many of us hear the word budget and immediately think of “financial handcuffs” or cutting back on the things we love. The irony is, if used properly, a budget provides the framework and visibility for reaching your future financial goals.  It brings awareness to your situation and can save a lot of strife in relationships (money is one of the major causes of disagreement in relationships).

Creating a budget

A budget is a categorized list of everything you earn and everything you spend.  It is probably the most underrated tool in personal finance.  So, how do you start creating a budget?

Step 1: Start by looking at your monthly fixed expenses.  Fixed expenses are those that don’t change from month to month.  For example, your rent or mortgage payments, heat & electricity, childcare, car payments, student loan payments, health insurance, etc.

Step 2: You can then look at variable or discretionary expenses.  Some examples are: your coffee runs, eating out (lunch/dinner), clothing costs, and travel.   These are just examples to get you to start thinking.

Step 3: Now, look at your income from all sources:

• Salary/wages
• Income from savings and investments (Dividends, Interest, Capital Gains)
• Income from side jobs
• Rental Income
• Other?

Is there money left over for saving? If so, kudos to you! This means that you are spending less than you are making.  Your next step should be determining what to do with the money you are saving each month- we can help.

Are your expenses greater than your income? We can work on that. Are there any expenses that can be reduced? Are there things you are paying for but not really using?  Some examples might be subscriptions or memberships.  Can we identify ways to reduce the interest you’re paying on your credit cards or student loans?

Are there things you could be doing to earn more?  Have you thought about starting a business or writing a book?  Have you considered whether you could earn money from a hobby?

Way to Track Your Spending

There are so many ways to get the job done, the key here is picking one approach and starting now! Some people prefer using a dedicated notebook, some may like an excel spreadsheet and others may like to use an app designed for the task.

If you prefer technology, there is no shortage of budgeting apps to choose from.  A quick Google search for “budgeting apps” will yield all sorts of options.  In addition, most credit cards now offer categorization tools and year-end summaries of spending.  If you don’t use credit cards, you can start tracking how you spend by consistently and accurately writing it down or keeping a spreadsheet.  The tool you use is less important than the data you track.

Whether you are saving, looking for ways to create a budget, or need assistance with managing your expenses, let’s talk. We can help you. www.clarusfinancial.com

Written by: Kaysian C. Gordon, MBA, CFP®, CPA

Posted by: Chuck Rose, CIMA®, CFP®

Clarus Group, LLC

4400 Route 9 South, Suite 1000, Freehold, NJ 07728

(732)325-0456

Securities and advisory services offered through Commonwealth Financial Network®,

Member FINRA/SIPC, a registered investment advisor. Fixed insurance products and services offered through Clarus Group and CES Insurance Agency.