Budgeting & Financial Goals

Do you have goals in life that you want to achieve?  Of course you do!  Setting goals is an important part of keeping your life organized, and it gives you something to look forward to.  Setting financial goals is just as important as personal goals and will provide a “framework” for any future money decisions.  Here are some tips to help with setting goals while budgeting.

Call A Meeting

Every single year sit down and have a financial goals meeting with yourself if you are single, or with your spouse if you are married.  The purpose of this meeting is to set and evaluate your financial goals.  Look at the previous goals you set and see where you are at on the scale of completion.  Did you reach your goal over the past year?  Great!  It’s time to set new ones.  Setting new goals will make sure that you won’t get lax with your budgeting.  Oftentimes, when people reach one of their goals, their budget goes out the window.  That’s why new goals are so important.

Don’t Get Ahead of Yourself

Make sure each of your new goals are attainable.  Don’t make your goal so incredibly large that it will take 30 years to achieve.  If you do this, you will get discouraged and quit everything.  Set goals that you know you can achieve if you work hard.  Don’t base your goals off something that only has a chance of happening.  Set a solid plan in place that, if you follow it all the way, will lead to a known success.

Line ‘Em Up

When budgeting, it’s important to make sure that your financial priorities line up with your priorities in life.  If you set a goal of buying a house in the next five years, make sure your budget reflects that.  Don’t take lavish vacations all over the world multiple times a year if your true goal is to save for a house.  Now, if your goal is to be able to travel lavishly every year, then your vacation fund section of your budget should reflect that.  The point is, if you have a financial goal, make sure you aren’t wasting a lot of money in other areas if they aren’t priorities.

Think Both Ways

When goal setting in any area of your life, it’s always good to make short-term and long-term goals.  In finances, it is especially important.  Having long-term goals that you are working toward–such as retirement or emergency funds–can provide you with a peace of mind that you are on the right track.  If something happens, you have those goals you are working toward to back you up.  However, once you have those goals in place, setting short-term goals is what makes life a little more fun.  Setting budget categories for vacations, homes, home remodeling, cars, events, etc., will help you see that you can be responsible with money and still achieve all the things you want in life.  It just takes a bit more patience.  However, always make sure you are contributing to your long-term goals before you put money towards the fun categories.  

A good life is all about balance.  When you set financial goals, you are showing yourself that you can plan for the things you want and need in life, and you are in control of where you money goes.  Going through life without a plan, budget, or goals is sure to set you up for chaos.  Be smart–set goals you can achieve, and your life will be what you make it.

What Budgets Can Do For You

Making a budget and sticking to it may seem like a tedious task that only restricts you from doing the things you want, but in actuality it is the opposite.  Having a budget can set you up to win financially in the future.  It is only restrictive if you make it restrictive.  Here are a few good things that budgets can do for you and your life.

Reach Your Goals

Having a solid budget can not only organize your life, but it can help you reach all of your financial goals over time.  Setting financial goals can help you get to where you want to be in the future.  Making categories in your budget for each of your goals, and then regularly putting money in the categories will put you on the right track to reaching every single goal you set–as long as you stick your budget.  When you break your goals up into categories, it makes them seem more attainable.  When you feel your goals are attainable, you will be more likely to reach them.

Reduce Stress

While some people may believe that having to stick to a budget will cause stress, it’s actually the other way around.  Having a budget reduces stress because you know exactly where your money is going.  When you have a plan for your money, you don’t have to worry about there not being enough money left at the end of the month.  Budgeting lets you see where every dollar is being spent, and all you have to do is simply follow the plan.  Stress over finances significantly lessens when a proper budget is in place.

Shows Waste

Budgeting can show you many things about your life, but one of the main areas that gets brought to light is how much money you waste.  Do you feel like you never have enough money to put in savings?  If you look at your spending habits, you will probably find that there is money available to save, you’ve just been spending it on things like coffee shop coffee every morning, trips to the convenience store for snacks, eating out, etc.  Once you set a budget, you no longer waste that money because you have a certain amount to spend in those categories.  Once you’ve spent it, you’re done.  This leaves more money available to put in savings.

Builds Good Spending Habits

Along the same lines as eliminating wasteful spending, budgeting can help you build good spending habits.  When you have your financial life down on paper, it makes you realize that you don’t want to be wasteful with your money.  It helps you look at your goals and evaluate every purchase you make.  After several months or years of being conscious of your spending, this way of life will become second nature to you.  You won’t want to go back to the old way of spending because your budget has set you up for success.

How To Start A Simple Budget

When you think of making a budget, does panic start to slowly rise?  Budgeting can definitely have a bad connotation to it, but if you think about it as a learning tool that helps you become more financially stable, you might give it a second thought.  Budgeting is just telling your money where it is going every month instead of it telling you where it is going.  When you have a budget set firmly in place (and you follow it correctly), you know exactly how your money is being spent.  This causes less financial stress and worry and lets you actually enjoy your money.

If you’ve never started a budget, it may seem like an overwhelming task, but you can actually start a simple budget in five easy steps.  Just read below to find out how to get started.

1) Define Your Goals:

Is your goal to pay off debt quickly?  Is it just to maintain your current finances?  Is it to save for an emergency, special item or trip?  Write down all your financial goals for the foreseeable future and put them somewhere where you can see them everyday.  This will help keep you on track with your budget.  On those days where you feel like you might want to go off track, remember your “why” and stick to it!

2)  Define Your Income:  

Now that we have your goals down and in place, it’s time to tackle the actual budget.  Write down every stream of income your household makes and how often you get paid.  Add all of the income streams up and put that total at the top of your budget.  Now you know exactly how much money you have to work with every month.

3)  Define your fixed expenses:

Fixed expenses are those expenses that you absolutely have to pay every month.  Usually these expenses are the same amount every time, but sometimes they can vary.  These are items like mortgage/rent, utilities, credit card payments, car payments, cable, internet and phone bills.  Add all of these monthly payments up and put the total under your income total.  

4)  Define your discretionary expenses:

Your discretionary expenses are things that change every month.  Figure out how much you need to spend on groceries, gas, eating out, gifts, clothing, savings and other items that may change from month to month.  Write down all the spending categories you need to have every month, and then put down how much you are willing to budget beside them.  Take all those numbers, add them up, and then put the total under the fixed expenses total.  

5) Total your budget:

Subtract the fixed and discretionary expenses totals from your monthly income total.  The total should equal zero.  

If you have a negative number, it’s time to do some tweaking to your budget.  Look at your discretionary expenses.  Can you budget less in some of those categories to get your budget total to equal zero?  This may mean cutting back on coffee runs, eating out or other “fun” things, but in the long run having a financial peace of mind will be worth it.

If you have extra money left over after you have subtracted your expenses from your income, take a look at your goals you defined in step one.  Was your goal to save up for something?  Great!  Put that extra money towards savings.  Was one of your goals to pay off debt?  Put that extra money into a debt payment to speed along the process.  It’s up to you what you do with that extra money, but put it in the budget so that you have a plan for where it goes.  

Congratulations!  You have made a budget.  As you can see, making a budget is really a simple process, and it is a great tool to have in your arsenal.  If you have a plan and stick to it daily, you are sure to win with your finances.