Taiwanese ethnic man viewing household budget and organizing bills using laptop in a comfortable sitting
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If you’re trying to manage your finances, most financial advisors start with one simple step: setting up a budget.
The coronavirus pandemic and the subsequent recession and recovery have made budgeting more important for many Americans. According to Debt.com, about 80% of those surveyed in 2021 are budgeted, a 12% increase from 2019.
Budgeting and spending planning is the first step towards financial health as it serves as a guide for your money.
Frederick Standfield, a certified financial planner and founder of LifeWater Wealth Management in Atlanta, said: “It will inform you about some important decisions.”
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According to Tania Brown, CFP and coach of SaverLife, a nonprofit organization focused on helping low-income Americans save money, it’s important for everyone to budget, no matter how much they earn. ..
“The budget tells your money where to go and what to do so that you can live the life you want,” she said. “The less money you have, the more important it is, the more you prioritize where that money goes.”
how to budget
Experts say that the first step towards creating a solid budget is to define financial goals. Financial advisors recommend different ways to do this, such as thinking about a bigger goal and identifying core values.
Once you have a clear understanding of what you are trying to achieve, you need to create a financial list of your current location, including income, expenses and liabilities. Then you get a monthly salary, a part of which is allocated first for basic expenses and then for financial goals. If you still have money, you can apply it to spend in fun categories like traveling and eating out.
If you do not have enough income to meet all your wants and needs and save for your long-term goals, then you need to consider reducing your spending or a longer time frame for saving. These options will help shape your financial plan.
Jarrell Butler of CFP, founder of Millennial Financial Solutions in New Orleans, said:
Once you’ve set your budget, the next part is automating the potential parts like invoice payments, savings, and expense tracking.
There are many ways to do this, from using simple spreadsheets to using apps like Mint, Personal Capital, and You Need a Budget (YNAB). The important thing is to find the best way to track your money. I will continue to use it.
preparation for success
Sure, some people struggle to keep their budget, especially at first. There are several things that can help get you back on track.
According to Julie Quick, founder and CFP of Cultivate Financial Wellness in White Lakes, Michigan, the first general can change the way you think about budgeting. She helps clients plan their spending instead of using the word “budget,” which she says pertains to an affordable version of the diet.
The idea is the same – it’s a plan for how you allocate and spend money – but the terminology difference helps people feel they are in control rather than limiting themselves. ..
“I’m not going to tell every customer what you can and can’t spend money on, only you can do it,” she said. It’s about understanding what’s important to you and adjusting your dollars accordingly. “
You can also try new ways to budget and track your spending, Brown said. If using your spending tracking app is too stressful, for example, you can try something like checking on your spreadsheet monthly.
Experts also say that people usually forget some money in the first place or overestimate the amount of money they can save, so meeting a solid budget usually takes months.
To counter this, Brown proposes to prepare for success by first giving yourself a lot of grace and choosing achievable goals, at least for the first few months.
For example, if one’s goal is to save $100 a month, she recommends starting with $50. When you reach or exceed your goals, it encourages you to keep going, she said.
When to consult an expert
Many people can set and maintain their own budget, but if you’re really struggling after a few months, it may be time to consult an expert.
If you need help with budgeting basics, or if you’re having trouble spending, we recommend working with a financial counselor, coach, or even a financial therapist. If you’re considering a long-term investment, or if you need help with goals such as buying a home, retiring, or saving for college, you should consider working with a financial advisor.
Kevin Lao, founder and CFP of Imagine Financial Security in St. Augustine, Florida, said the couple wanted to work toward their goals with the help of an objective third party, especially in collaboration with experts. is sex.
“They may have different philosophies, or one may have a stronger personality than the other,” he said. “The process of sitting down and talking to the couple about their goals is very important.”
Experts also help with one of the most important parts of budgeting: just getting started.
“You can’t get there without taking the first step,” Standfield said. “Then get started.”
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