So, January is nearly over and many of our New Years resolutions have gone by the wayside. If one of those was the dreaded B word, budget, perhaps it is time to reconsider. Should revive your plan for 2018?
The first thing you might do is remember why you were going to create your budget. It can help you visualize how much you spend (expenses) and how much money you earn (income). With these figures in mind, you can adjust your spending habits to use your money more wisely. These figures can also help you to spread out your income so that you have money at the end of each month.
To create your budget, list your expenses on one piece of paper and your income on another. You might want to use two columns on a spreadsheet to do this. Add up each and subtract the expenses from the income.
If the result is a negative number, you are living beyond your means. With your budget in front of you, you can determine where you can spend less money and then make plans to change the negative into a positive. What bills (food, housing, etc.) are necessities? Which are desires? How much do you spend on impulse items and which items do you plan for before you buy? Which purchases can you cut out or cut down on to curb your spending and use that money elsewhere?
If your result is positive, you can decide what you want to do with the surplus. Putting your surplus into savings is one idea. Do you want to start saving for a vacation, big ticket item or education for someone in your family? Do you want to take an impromptu trip to the beach or mountains?
Now, review how much you will spend on each category of your expenses. This is your budget for the month. Once you know this, you need to stick to it. Keep track of your spending and income for a month. Write down everything you spend and keep track of how much you take in from your job and other sources. At the end of the month, add up your expenses for each category and subtract that total from your income. Make necessary adjustments and begin again the next month.
Les Merritt, CPA, can help you with this process and, after you begin adhering to your budget, start increasing your surplus. Call him today at (919) 269-8553 to set up an appointment and help make 2018 your most successful year ever!