Keeping your finances in check doesn’t have to be a chore. By turning your monthly budget review into a routine, you can stay on top of your financial goals and enjoy the process! Regular budget reviews help you analyze your spending habits, spot areas to save, and make adjustments to stay on track. Dedicate a bit of time each month to your budget, and watch how smoothly your financial journey becomes.
Budgeting Basics in 3 Simple Steps:
Before you dive into your monthly budget review, it’s important to grasp the basics of budgeting. Think of a budget as a game plan for your money, helping you track income and expenses so you can make smart decisions about where your cash goes.
- Income Assessment: The first step in creating a budget is to get a clear picture of your income. This includes money from your job, rental properties, side gigs, and any other sources. Be realistic about your income and account for fluctuations throughout the year. Make a list of all your income sources and total them up to get a clear picture of your financial inflow.
- Expense Tracking: Next up is tracking your expenses. This covers all your monthly costs like bills, groceries, and entertainment. Start by listing fixed expenses like rent or mortgage payments, utilities, and insurance. Then track variable expenses like groceries, dining out, and entertainment. Once you have a comprehensive list, total them up to understand your monthly outflow and see where you might be overspending.
- Setting Up Your Budget Review Process: To make your budget review a breeze, decide how often you’ll do it and gather your tools.
Monthly reviews are great for those with variable income or expenses, while quarterly reviews might work for those with more stable finances. An annual review is perfect for checking in on long-term goals.
To gather all the financial data you need for a thorough review, you’ll need:
– Budgeting software or a spreadsheet to track and categorize income and expenses
– Bank statements and credit card bills for account reconciliation
– Receipts and invoices to verify and categorize expenses
– A calculator for computations
– A notebook or planner to jot down findings and future plans
Evaluating Your Budget Results & The Challenge of Maintaining Discipline
Analyzing your budget helps you spot trends and adjust your goals. For example, you can compare your actual spending to your budgeted amounts using a budget variance report. This way, you categorize variances into positive (spending less than budgeted) and negative (spending more than budgeted) to understand where adjustments are needed!
Another way to spot trends in spending behavior is to compare your actual spending by category over a period of time using an expenses by category report. This way, you can see if the spend is reducing, staying the same, or increasing over time. You can also see how seasonality impacts your spending.
Here are some final tips to help you stay on track:
- Creating Accountability Measures: Set up automatic payments for as many bills as possible to avoid late fees, interest penalties, and the risk of any lapse in coverages. This is especially important with insurance.
- Leveraging Financial Insights: Use budgeting tools or apps to track spending, set financial goals, and monitor progress. Also, regularly review your credit report for insights into your financial health. Credit reports are available for free from AnnualCreditReport.com
To wrap up, discipline is key to whatever recurring task you plan on working on. Just like fitness goals, budgeting requires discipline and dedication every month. However, staying on top of your finances and knowing where your expenses are going will give you peace of mind, like a runner who finally crosses the finish line after months of training.
By making your budget review a regular habit, you can avoid overspending and work more effectively towards your financial goals. So grab a coffee, sit down with your financial tools, and make your money work for you!
And if you ever need a hand or two with any of your day-to-day financial tasks, feel free to reach out to us, your best choice for Daily Money Management.
Jeremy Zizmor is the founder of Assurance Family Partners, a company whose mission is to assist and empower individuals and families who need help managing their personal day-to-day finances. He is responsible for running all facets of the business.
