Several years ago, my husband and I started the adventure of building a house. We were included in many of the production decisions, from selecting appliances to type of flooring to the placement of electrical outlets. Each decision played into the next and eventually became the blueprints of the new house. Each decision was delicately worked into the blueprints in order for the builder to construct a house that is safe, complete, and ready for use.

As we begin this new year, I encourage you to develop blueprints of your financial house. This type of blueprint is commonly known as, you guessed it, the budget. Have you established a financial budget for this year? I want to use this month’s blog to provide you with tips to make your budgeting process a success.

1. Budget one month at a time. It can be very overwhelming to attempt to budget an entire year at one time or to even budget week-by-week. After you complete the current month’s budget, budget out the next two months. Doing so will allow you to see what expenses are ahead in order for you to develop a plan to save for them.

2. Your budget is simple math, not a college calculus problem. Simply put, you begin with your income (the amount of the paycheck you bring home) then subtract out your expenses.

3. Before you budget out debt repayment and extraneous expenses, be sure the foundation of your financial house is well cared for. The first four categories of your budget should be (1) housing expenses (i.e. mortgage/rent, utilities, insurance), (2) transportation (i.e. car payment, insurance, fuel and maintenance), (3) food, and (4) clothing. By taking care of these items first, you will feel less stressed about tackling debt payments and other expenses.

4. Income minus expenses should be zero. You must give a name to every dollar that comes in and every dollar that goes out. At the end of the month, would you rather say that you told your money where to go or would you like for it to tell you where it went? It’s great when people can get to the end of their budget and have some money left over. However, if you don’t make a decision about how that extra money will be used, it’s possible that it will just disappear. Cho0se to use that extra as additional savings or additional debt payments.

5. Don’t forget the small things. It’s really ok to allow yourself a little indulgence in your budget. A budget isn’t a restriction device; it’s a plan for how to wisely use your money. Also, include a category for miscellaneous expenditures. This category is for those unexpected items such as providing treats to your child’s classroom or a spontaneous collection to support a local charity.

I hope these tips provide you with great information as you prepare your financial blueprints for this new year!

Do you have any tips on how you prepare your budget?

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