Budgeting: Where to begin

Budgeting:  Where to begin

Budgeting as a whole is not complicated, but it can be somewhat overwhelming if you do not know where to start. At Wise Pace, I always love to begin working with my clients from the very start. Not ready to discuss quite yet? Here are a few first steps for you to get started.

Step 1: You need to know how much you are spending and what you are spending it on. Depending on your preferences, you can manually track every purchase, or leverage existing technology- if you choose to. I personally leverage technology and currently use Wise Pace's budgeting software that is included in services as a client. There are also free services like Mint that have a lot of great tools.

Step 2: Create the budget. We will be using what is known as a zero-based budget. You should create a starting point budget to use as a guide. This budget guide will be used later to compare your actual spending with the recommended spending.

Remember that this is just a guide, and you will make tweaks along the way when necessary. A budget is never set completely in stone, thus it is a fluid document. The goal is to not spend more than you make and to assign every dollar a job.

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Use the recommended range guide to the left to determine a fixed percentage that will be used in the specific category. An example would be 10% to charity. Also, some things like clothing are not needed to be purchased monthly. Use the budgeted amount for clothing as a disciplined saving for when it is time to buy new clothes.

Keep in mind that everyone's budget and goals are different. Make sure to total up your percentages to ensure they equal 100%. Otherwise, you could be budgeting to spend more than you make. If you have questions, I'd be happy to help.

Step 3: Categorize all transactions. This is vital for staying within a budget. It is very difficult to know where your money is going without this step. Budgeting software makes this much easier but it still needs some maintenance.

Step 4: Daily decision making. Use your tracking of purchases to help you make decisions throughout the month. This is where budgeting software is extremely helpful. Wise Pace has an app (for clients) that you can download to your phone to reference your budget where ever you go. Mint also has a great app as well. Having instant accessibility is powerful when trying to decide if you should join your co-workers in eating out for lunch. Just pull up your budget within the app. If you have plenty of money in the budget, then go eat with your co-workers' guilt free. Of course, if you do not have the funds left then it would be best to take a rain check.

Step 5: Monitor and review. I recommend spending dedicated time twice a month to evaluate how you are doing. The middle of the month should be used to evaluate if you are right on track or if adjustments are needed to stay within budget. At the end of the month, evaluate how you did and make adjustments for next month.

Reach out to us if you need more help. Remember, I offer free - no obligation consultations. Let's talk!

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