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Your Budget

By on February 9, 2014
Piggy Bank

Now that we are firmly into the new year, many people are likely managing resolutions to improve their well-being.  With regards to personal finance, establishing a budget is as good a resolution as any.

A budget is an effective tool for controlling debt and serves as a financial guide.  It lets you know if you are heading in the right direction and are on track to reach financial goals such as buying a home, sending a child to college, or preparing for retirement.  In addition to being an effective financial guide, a budget allows you to measure your progress on a regular basis and implement changes as necessary.

The first step in establishing a budget is to track your expenses over a given time period; three to four months at a minimum.  Doing so will reveal two critical pieces of information: your total expenses relative to your income and your current income allocation.  With that information in hand, you are ready to gain control of your financial life.

Ideally, your income will exceed your expenses.  If not, you should consider ways to generate more income and/or determine how you can reduce expenses.  Once you have achieved a positive monthly status, you can look more closely at your current allocation.

Are you allocating enough money to areas such as savings or retirement accounts, and other vehicles that will help you reach your financial goals?  If not, your budget will help identify the areas (e.g. entertainment, clothing, transportation) where you might be able to reduce expenses, making a shift to more desirable areas.

written-budgetAs you might imagine, the budgeting process is not a once and done proposition; it is a very dynamic process that will change over time as your income changes, your debt is reduced, and numerous other factors.  Therefore, you must be prepared to monitor, and adjust as necessary, your budget on a regular basis, continually looking for ways to reduce expenses and ensure that you are on track to reach your financial goals.

Microsoft offers numerous free Excel spreadsheets to assist with developing and maintaining a budget.  My personal favorite, which offers a nice balance of detail and ease of use, is the Personal Budget Worksheet.


Other budget spreadsheets, offering various levels of complexity and focal points (e.g. weddings, college, fundraising, etc.) can be found on the Microsoft Office page.


Mr. James C. Molet holds a MBA from Wayland Baptist University. He blogs on financial topics at retirement savvy.net  and author of RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit. Mr. Molet retired from the U.S. Army after 21 years in 2005.

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