Contributed By: Geoff Stam, Director Default Management and Financial Literacy, Office of the Chancellor

Do you ever ask yourself where did the money go each month?  Maybe you ask why you are falling short financially or struggling to get ahead.  What do you need to do financially to be at least on even terms with your money at the end of each month?  Or, are you just trying to figure out how to move yourself forward financially to achieve your monetary goals?  If you are asking any of these questions, establishing a budget can help you track your spending and get you on the right path to meet your financial objectives.

There are a few steps to setting up a budget.  We will cover the steps in more detail in subsequent articles but each one is important to the process.  Don’t skip any, or the budget you build may not find the success you seek!

Step One
Determine your goals. What do you want to accomplish financially with your budget?  Start with shorter term goals; saving for emergencies, a new car, a vacation, paying off debt such as credit cards or student loans, or just making sure you are breaking even at the end of the budget period.  Also consider your long term goals such as a new home, a child’s college, and retirement.  Prioritize your goals and determine what you will need to save to reach them.  Using SMART goals can help this:

S for Specific; use clearly defined and concise goals.

M for Measurable; create measuring points or a road map to make sure you are staying on task.

A for Attainable/Realistic; a goal you can actually reach.

R for Relevance; determine what is important to you financially as an individual.

T for Time-framed; establish a time to complete the goal.

Step Two
Identity your income and expenses.  To build a budget that meets your financial behaviors but still accomplishes your goal, you need to understand what money you have to work with.  Track your monthly income; wages, salary, tips, allowances, child support, or any other forms of earnings.

Next, track down all of your expenses, from your housing (rent, mortgage) down to the vending machine beverage you bought as part of lunch.  To help find where you can make some changes in your spending, divide the expense into 2 categories; fixed (do not change month to month like housing, insurance, child care) and variable (items you can adjust your spending on with changes in behavior like food, cable TV, phones, entertainment).   Keep in mind out-of-pattern expenses like house repair, car repair, holiday gifts and so on.

Step Three
Do the math.  Income less expenses determines your net discretionary funds.  To get ahead, you should be making more than you are spending.  If you are spending more than you are earning, it’s time to make some changes to how you are spending your money.

Now that you have the basic framework of a budget based on your current behaviors, take the next few months to track your income and expenses.  By doing so, you will be able to find places to make changes in your spending habits that can help keep you on track to meet your financial objectives!  Identify wants and needs but don’t make it too rigid.  Allow flexibility to treat yourself on occasion.  Modify the budget as income and expenses change.  As you make these adjustments you can see minor modifications to your budget that make it fit your financial behaviors and goals better!

If there is a specific topic you would like to hear about, please let us know.  We can be reached at (904) 296-3440 extension 139, or via email. The i3 Group can be reached at (866) 296-7955.