Making Cents of Your Monthly Budget, and Other Financial Fitness Tips

 Some say money makes the world go ‘round. Biggie sang “Mo Money, Mo Problems”, but most people would agree, its sure nice to have, especially when its flowing. Money helps us pay for all the things we want – including gear, gadgets, cars and vacations – plus all the things we need, like food, shelter and healthcare. Most of all, access to money means independence – being able to do what you want, when you want, and on your own terms.  

Whether you’re buying a car, going on a shopping spree, getting a credit card or opening your first checking account, decisions you make now can impact your financial future. Below are a few helpful tips to develop and maintain financial wellness: 

Create a realistic budget: 

A budget compares the money that’s flowing in with the money that’s flowing out – simply put, your income versus expenses. The key to creating a healthy, sustainable budget is to be realistic and create a budget works best for you: 

1. Review all bills, pay stubs, receipts and financial statements from the past 2 months to determine your average monthly income and expenses. 

2. Income is how much money you take home (after taxes), plus money coming in from side hustles, estate disbursements, etc. It does not include money in long-term investments like 401k plans.  

3. Sort your expenses into two categories:   

• Fixed expenses:  Bills and obligations that are due every month and tend to be around the same amount 

  • Categories may include: Rent/mortgage, utilities, car payment, car insurance, student loans, etc.  

• Variable expenses:  Expenses that change month-to-month 

  • Necessities:  Groceries, clothing, personal care, savings contributions, misc. 

  • Pleasantries: Vacations, restaurant and bar tabs, Netflix and Spotify subscriptions, etc. 

  • One off’s -- a monthly average of the year’s possible big ticket items, such as a new TV or unanticipated car repair.  

• Create a budget worksheet that sums your income and then deducts your expenses. 

  • If the expenses outweigh the income, start looking at the variable pleasantries you can scale back. 

• Ideally you would have a small cushion at the end of the month to deposit into savings or an investment account.  

4. Evaluate your expenses – do you really “need” that monthly subscription?  Could you dine out less frequently, or at more affordable restaurants? 

5. Live your budget for 1 month, then revisit and adjust as needed. 

 Remember to be lenient and realistic.  Go easy on yourself – you may overspend in some of your categories the first go around.  It is okay.  You’ll learn and get better next month!      

 Keep track of earnings and day-to-day expenses: 

 Hold yourself accountable by tracking all income and expenses as each month progresses.  Now you will see how that impulse item will affect your bottom line – or the difference in buying a new or used car will affect your monthly expenses.  

 In some cases, there will be pros and cons to weigh for each option. For example:  

• A used car may be less expensive than a new one, but repair and maintenance bills may be higher. A sure fire remedy is to do your homework on used makes and models that hold value and need fewest repairs. Check the Car Fax background of the exact car you have your heart set on, and pay a certified, third party mechanic to give your potential purchase a full, uncompromised inspection.  

• Even smaller expenses can add up. Investing $10/month in a Spotify or Apple Music account can save you loads versus buying all of your favorite albums on CD or vinyl.  

• When dining out, limit yourself to one drink and then switch to water or a non-alcoholic soft drink; you’ll get home safely and likely cut your tab by 1/3.  

 Helpful money management tools: 

• Create an account with a free money management service to track money-in and money-out in real-time.  A few of my favorites include: 

  • https://www.personalcapital.com/  

  • https://www.mint.com/ 

  • http://www.hellowallet.com/       

• Once you choose your favorite, create categories that correspond with your monthly budget worksheet (i.e. rent, groceries, transportation, etc.).  

• Review app daily to fully understand your spending . 

Plan for your future: 

Once you have completed your budget worksheet and have awareness around how much money you’re earning and how much money you’re spending, you’ll need to somehow adhere to your budget to develop and maintain long-term financial wellness.   

To adhere to your monthly budget, you’ll need motivation.  We all do.  Setting your goals – both short term and long term, will be your biggest source of motivation!  Take some time to jot them down.   

• Short-term goals may include reducing eating out to 2x/week and cancelling a monthly subscription 

• Long-term goals may include saving X amount of money per month to buy a new car, purchasing a home or retiring early 

• You can set milestones along the way and reward yourself with an affordable indulgence like dinner at a nice restaurant, a new outfit (within reason) or a day trip somewhere fun.