Make a Monthly Budget Work for You!
Reaching your personal financial objectives, like most things in life, requires setting goals. For most of us, reaching financial objectives also needs to include creating and using a monthly budget (also known as a spending plan).
Whether your goals are as short-term as meeting your household’s monthly expenses or as long-term as planning for purchases like a new home or a new car, a budget (or spending plan) is designed to help you to understand where your money comes from, where it goes and how to allocate it to reach your financial goals. A budget (or spending plan) is simply the tool that allows you to be intentional with your money while giving you control of how your money is used.
Tips for Making Your Monthly Budget Work
- Be Practical. Understand your money. Know where it comes from (income) and where it goes (expenses). Before starting your first budget, track these for a month (using paper and pen or a spreadsheet is just fine to get started). When you use your debit card, track what the actual expense is (i.e., coffee at your favorite coffee shop, gas for your car, groceries, etc.) for accuracy when building your budget. After a month of tracking your income and expenses, you will be ready to create your first monthly budget.
Bonus Tip: Overestimate your expenses and underestimate your income as this will help create some flexibility in your budget. When there is money left over at the end of the month, put it towards your emergency savings plan!
- Choose the Right Budget System for You! First, the zero-based budgeting system is basically your monthly income minus your monthly expenditures should equal zero. Every penny within your budget is thoughtfully categorized by either income or expense. The trick with using this type of budgeting is to track every penny!
Another budgeting system is the envelope system where you set the monthly spending limit for each of your expense categories and put that amount of cash in its own separate envelope (for instance, $200 for groceries, $100 for gas or $100 for entertainment). When the envelope is empty, you are done spending for that expense category for the month, and may need to re-adjust your category spending limits for the next month. This system works well for those who want or need to physically “see” where their money is spent and consciously recognize their spending patterns.
Bonus Tip: Whether you choose the zero-based budget, the envelope system, or some other way to budget, look online for an app, there are apps to help!
- Remember to “Pay” Yourself! In your monthly budget, make sure to add a category or two for savings. By setting aside just $25 each month (or $6.25 a week!) in a savings account, at the end of one year, you will have $300 towards your emergency savings account or a separate account for a larger purchase (a car, a vacation or a piece of furniture). When building your budget, include categories for “Emergency Savings” and “Special Savings”, and fund both.
Bonus Tip: Take any left over unspent money at the end of the month and add it to either of these accounts – and watch your savings grow!
Monthly budgets are designed to be adjusted each month based on your income and expenses for that month. Take time at the beginning of each month to review your prior month’s spending, think about your income and expenses for the month, and plan accordingly (remember holidays, birthdays, car registrations, etc.)! Only you have the control over how your money is used and a monthly budget is the tool to help you to do so!
A Journey to Personal Financial Success
At Morgan Franklin Fellowship (MFF), we support the concept of financial freedom – by teaching participants how to save by paying themselves first, invest for their future and grow their net worth.
Learning how money works and how to talk about money with others are the first steps towards recognizing an individual’s lifelong financial goals. Our online programs, podcasts, blogs, and book reviews and resources are designed to help you learn the concepts, rules and vocabulary of money, finance and investing.
Becoming an MFF Fellow
Our Standards of Financial Literacy – Learning about money series is engaging, full of interesting information, and easy to navigate. Adapted from the National Standards for Personal Financial Education developed by the Council for Economic Education (CEE), this robust curriculum features six short lessons on such important topics as earning income, understanding the value of saving and using credit. When completed, this program lays the foundation for becoming an MFF Fellow.
Becoming an MFF Fellow is the ticket to access additional MFF programs and opportunities for mentoring, networking, internships and real-world opportunities. Hear from the MFF Fellow themselves on how these opportunities encourage them to continue their journey to personal financial success.
Learn More about Money
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