Calculating your financial budget

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Ten Things to Take Into Consideration When Creating Your Financial Budget

The thought of creating a budget is the source of dread for many people— spreadsheets, forms, and financial sacrifice create nightmares. But really budgeting just involves creating a plan, writing it down, and following it.
Taking the time to carefully construct a plan gives you a framework to guide your financial success. Here are 10 points everyone should consider when creating and maintaining a budget
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Set your financial goals

The main purpose of a budget is to reach your financial goals. Spend some time to reflect on what your goals are. First and foremost, be realistic. This ensures the chance you will achieve your goal. Second, consider your time and values.
If you want to live a lavish lifestyle, are you willing to sacrifice hours attaining education and working up to 60 hours a week? Or maybe you’d prefer a simpler means of living that allows for extra time with your family
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Write it down

Recording your expenses is key to understanding your spending habits. Tracking where your money is going allows you to measure how well you’re doing in regards to staying within your budget. If you don’t track your accounts, you will be scratching your head over where all your money went at the end of the month.
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Inflows & outflows

A critical piece of the budgeting process is to take a look at your inflows— money coming in and outflows— money going out. In fact this is the main data found in a budget. Now obviously, this data is important but many of us overlook these details when going about our day.
Inflows include not only your paycheck but money in the form of gifts, inheritance, or investments. Look at your income and make sure it exceeds your outflows each month so that you remain in a surplus rather than a deficit.
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Define assets and liabilities

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Fold a piece of paper in half. On one side write down your assets and on the other side, your liabilities. Assets would be the things you own of value— vehicles, equipment, and cash are some examples. Liabilities are your obligations, such as car or home loans, bills and other debt.
Working assets and liabilities into your budget is an important part of financial planning. You want to accumulate assets and limit liabilities.
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Spend less than you make

Easier said than done, however spending less than you make is crucial to sticking to a successful budget. For most people it is harder to increase your income than it is to decrease your spending. So in order to save you must limit your spending. Your future self will thank you!
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Keep fixed costs low

Following the mindset of spending less, a great way to do that is keeping your fixed costs low. Buying a fancy sports car means a larger monthly payment, while a humble sedan will get you where you need to go, without breaking the bank.
car means a larger monthly payment, while a humble sedan will get you where you need to go, without breaking You don’t really need the newest iPhone when your old one works just fine. Call up your internet provider and negotiate a better deal. Cancel those subscriptions you rarely use. You’d be surprised at how much you can save by taking steps to minimize fixed costs.
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Save early and often

A budget would not be complete without a strategic savings plan. This plan should include emergency savings, short term goals, and long term savings.
The rule of thumb for emergency savings is to have 3-6 months of living expenses saved. The emergency fund should be used for just that—emergencies in the unfortunate scenario you lose your income. Short scenario you lose your income. Short term goals are expensive purchases that you should pay in full. Like buying a new computer, holiday gifts, or saving for a vacation. Finally, long term savings is where you save to build the future you wnat.
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Create an investment strategy

Your best bet to maximize your long term savings is to create an investment strategy. Banks currently pay less than one percent interest on deposits. With account fees, it’s possible to lose value sitting in the bank! So how can you put your money to work? Consider the following alternatives:
Certificate of Deposits (CDs)
Bonds
Stocks
Founds
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Track progress and results

Budgeting is a never ending process that should be analyzed regularly. Make sure you compare your results with your plan on a monthly basis. Check progress against your short and long term goals. This ensures you stay on track and make changes where needed.
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Use a budgeting tool

There are plenty of tools available today to provide some structure to creating your budget. There is a digital budgeting solution for any need,
For example, if your household consists of roommates or family members where everyone contributes, you may want to check out Buxfer. This site specializes in group budgeting. Couples can check out Honeydue, and individuals might want to use Mint. These tools can help automate your budget for a simpler, personalized experience.
Budgeting Leads to Financial Success
You can learn so much about your financial habits by developing a solid budget. Once you establish a concrete plan regarding your finances, you’ll be able to spend money, where and when you want to. A budget allows you to plan for the future creating more financial freedom. You’ll likely wonder how you ever lived without it!

Budget Calculator

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ENTER YOUR INCOME
ENTER YOUR EXPENSES

YOUR 50/30/20 BUDGET REPORT

Your income should cover your expenses based on the 50/30/20 rule:

50% for needs, 30% for wants and 20% for savings and debts.

Here’s how you compare to the ideal budget: