Financial Goals - Budgeting
Budgeting was not a skill I was taught in my public school education. At home, my mom always said, “Be wise with your money.” But it wasn’t until college when I took an elective course about life outside campus that I learned how to make financial goals and budget.
Recently, my parents realized they need to set some big financial goals in order to be able to retire in the next few years. This meant creating and living off a budget. It was very strange when my mom came to me to ask for help creating a budget. As this is something she was never taught, and I made the extra effort to learn, I want to share some insights for anyone else looking to create financial goals - specifically in the form of living off a budget.
Why budget? Creating a spending plan for yourself ensures that you will have enough money for what you need and, hopefully, for the things you want as well.
Who budgets? A budget is for anyone! Whether you receive a regular allowance from your parents, have a part-time job, a side-gig, or work full-time, you can budget.
How to budget? To begin creating your budget, start with your goals. They can be as simple as wanting to pay all your bills that month. It could be that you’re setting aside your allowance for a new gadget. Or maybe saving up for a vacation.
Write down your goals
Example Kim: Wants to save up for a new car ($5,000)
Example Miles: Wants to sign up for Disney+ to watch the new Star Wars shows ($8/month)
Write down your income sources and amounts
Example Kim: Full-Time Job = $2,000/month
Example Miles: Allowance = $30/month & Yard Work in Neighborhood = $30/month
Make a list of bills or required expenses
Example Kim:
Rent: $550
Utilities: $150
Netflix: $13
Phone Bill: $200
Groceries: $200
Example Miles: Owes sister $10
Add up your required expenses. Take that total amount and subtract it from your income to see if there’s money left to spend or save on future goals.
Example Kim: $2,000 - $1,113 = $887 remaining (Expenses: $1,113 Income: $2,000)
Example Miles: $30 - $10 = $20 remaining (Expenses: $10 Income: $30)
Look at the goals you wrote down compared to the dollar amount you have remaining after bills and required expenses. You might not have enough money to meet your goal right now, but you could save up to reach it!
Example Kim: If Kim saves her remaining $887 each month, she will be able to buy her car in 5-6 months.
Example Miles: If Miles has $20 remaining each month (more if he doesn’t owe his sister in the future) he can afford to sign up for Disney+.
Now, these are very bare-bone examples. In most cases, you may have more expenses. In some cases, you may need to look at what you can cut from your budget in order to reach new goals. A good rule of thumb is to go through your last 3 months of bank statements and tally up how you spent money in the various categories. This will give you a good foundation for creating your own budget and working towards your goals.
Challenges/Points:
Not everyone is taught how to budget or live off of a budget, and that’s ok. It’s never too late to learn.
Setting financial goals is a great way to help you succeed, and budgeting is a tool to help you reach your goals.
Look at your spending over the last few months and ask yourself if you’ve been making wise steps to meeting your financial goals.
Questions:
Have you ever made a budget before? Do you think it would be helpful in reaching your goals?
Why or why not?
After creating a budget, do you think you are a frugal spender (sparing or careful with your money) or that you’re more extravagant (lacking restraint in spending money)?
What are items you could cut out of your budget, or reduce in spending, in order to meet your financial goals?
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