Budget Like a Master

Welcome to the How To $ave A Buck Newsletter! Each week, I share actionable ideas in personal finance, investing and how to save a few bucks in the process!

Every company does it.

They create a budget.

Even our country does it.

But why?

It’s important to know where they stand financially so that when a bill is due or money comes in, they can track their overall position in dollars.

Are you spending more than you earn?

Are you earning more than you spend?

A budget can help you calculate this answer. It helps you take responsibility for your finances, which can help you obtain a loan, apply for a credit card, maintain a bank account, etc.

But how do you create one? And what can the answer tell you?

1) Track your income and expenses: Start by gathering all the necessary financial information, including your income sources and all expenses.

Categorize your expenses into fixed (mortgage, car payment) and variable (groceries, travel). This will help you understand where your money is going and identify areas where you can cut back, if needed.

2) Prioritize debt repayment: If you have any high-interest debt, such as credit card debt or personal loans, prioritize paying it off. This type of debt is notoriously high, upwards to 25% or more.

Allocate a portion of your budget towards this repayment, focusing on the highest-interest debt first.

This will save you money in the long run and free up more funds for savings and investments.

And we are all about saving $ here!

3) Set realistic savings goals: Determine how much you want to save each month and allocate a portion of your income towards savings.

It is recommended to have an emergency fund that covers 3-6 months of living expenses. Additionally, consider saving for specific goals like education expenses or a down payment on a house.

Automate your savings by setting up automatic transfers to a separate savings account, particularly a HYSA (High Yield Savings Act) which can earn more than 4% currently.

4) Minimize or eliminate unnecessary expenses: Review your expenses and identify areas where you can cut back.

Look for subscriptions or memberships you no longer use or reduce dining out. If you have a credit card with a fee, call the credit card issuer and ask for a fee rebate/reduction.

Call your utility company and inquire about ways to reduce your monthly expense. Consider negotiating bills, switching to cheaper alternatives, or eliminating non-essential expenses altogether.

Enjoy reading? Stop buying books and get a library card at your local library.

Redirect the money saved towards debt repayment or savings.

5) Plan for investments and retirement: Once you have paid off high-interest debt and established an emergency fund, focus on long-term financial goals like retirement.

Allocate a portion of your budget towards retirement accounts (e.g., 401(k), IRA, Roth) or other investment vehicles.

If you feel professional help may be best for you, consider consulting a financial advisor to help you make informed investment decisions based on your risk tolerance and long-term goals. Understand if they provide free advice or paid, and if so, what that fee is.

If minimal, it may be a great start to creating a budget that fits your specific situation.

Remember, creating a personal budget is an ongoing process. Regularly review and adjust your budget as your financial situation changes.

Some free tools to consider are below. They may have premium versions, but the free versions are fine to get started.

Excel (Microsoft)

Save On,

Chris