Does it ever feel like that is what you say to your paycheck: Hello, Goodbye? Well, with high inflation for many necessary items being one of the wonderful new issues with which we must contend, it may be time to reconsider your budget. I know, that is not a lot of fun; but it should be done by everybody!
Following is a suggested starting point for the process. Of course, your priorities may be different and are likely unique, but “well-begun is half-done”. So here is a very basic way to get started.
YOU SAY YES, I SAY NO
Step one is to set your priorities. If you have a spouse or other interested party in your household, you may not agree on these. Have the discussion! If you cannot agree on the priorities, then it is highly unlikely that you will both/all follow the budget. I strongly suggest that the first priority should be to spend no more than your income (hopefully less than that) on the regular and necessary expenses. One easy way to gather the expense information is simply to put your most recent statements for utility, mortgage or rent, insurance, food, transportation, tax, and other necessary expenses into a pile and add them up.
Step two is to make sure you have emergency funds! Sometimes the heater breaks, or the car needs repair, etc. Generally, you should try to put away enough to cover at least 50% of your regular income as an emergency fund. This won’t happen quickly for most of us, but you must have emergency funds to cover unexpected expenses. You will have an idea of what is coming if your heating and A/C or roof are a bit old, or if the car has many miles, for example.
WHEN I’M 64
I know, not the same song, but stick with me here. Step three is to save for retirement. When you contribute to your 401k or IRA etc. you typically get a tax break; and if your employer matches any of that you get free money! Please don’t wait until you are 64 to start.
YOU SAY STOP, AND I SAY GO
Step four is to plan your extra stuff. Obviously, these are NOT the top priority; but if you can afford dinner out or a trip, etc., then put it into the budget. If you cannot presently afford this, then make it an aspirational item and start saving.
I SAY YES, BUT I MIGHT MEAN NO
Step five is to evaluate saving for weddings, education, etc. This is so far down the list for this reason: You and your children can borrow for this if needed. I don’t like debt either, and if you can afford these on your current income or have saved for them in advance, then good for you. But frankly I would rather see you save for your own retirement and take on a responsible amount of debt than retire with no savings.
DON’T FORGET, THIS IS NOT A ONE-TIME THING AND SHOULD BE RE-EVALUATED AT LEAST EACH YEAR, AND ADJUSTED AS NEEDED.
We have done in-depth retirement and financial plans for our clients, and they are all unique. However, you can go onto our website and find some tools that will help with your planning and budgeting.