Is Your Budget Ready for the New Year?

Over the past few weeks, I’ve been building an application called Budget Buddy. It’s a tool to help our staff to track and manage expenses for their respective teams. It’s been interesting to work on, and I’ve been learning a lot about the budgeting process. Yesterday, as I was knee-deep in Budget Buddy reports, I learned that two of my coworkers are creating personal budgets for themselves this year. What can I say, folks? Sometimes the blog topic finds you and not the other way around…

Why think about your budget?

“I have way more money than I can ever spend!” said no one, ever. Whether you’re at work or at home, the things we want or need sometimes exceed our available cash flow.

My parents have a simple philosophy – if you don’t have the money, don’t buy it. It’s great advice in general, but life sometimes throws you curveballs. You can’t predict these things, of course. If you can, please send me some lottery numbers! But, seriously, by understanding where and how you spend your money, you can arm yourself with the information to afford, for example, that last-minute trip to London.

How do you create a budget?

Here are some basic instructions for creating a budget. These folks say it better than I can, but essentially, it’s making a list of your income and all your planned expenses.

https://www.payoff.com/life/money/5-simple-steps-to-create-a-successful-budget/

I would be remiss in my duties as a Tools person if I didn’t suggest a tool for this. I suggest Excel. Most of us are familiar with it and it’s flexible. Best of all, a number of budget templates have already been created; you just download them and plug in your data. Here’s the link: https://templates.office.com/en-au/Budgets

I found a simple budget template that covers all the basics for personal expense tracking, and I downloaded it, here – http://pmo.dfci.harvard.edu/Budget_Template.xlsx
Feel free to save a copy and make it yours.

Once you plot out your expenses and income, then what? Next, you think about the things you want. This part can be fun. Here are a few questions you can ask yourself:

• Are you spending too much money on something? Or, is there something you’re spending money on that you would rather not spend money on?
• What are the things you would like to do this year that cost money? What about in the next 5 years? Do you need to make some spending adjustments to be able to do those things?
• Do you have an emergency pool of savings in case life doesn’t go to plan?
• Are you preparing for retirement? (I realize this is a big question, but financial planning is a sort of long-term budget.)

If your $6 latte is a non-negotiable expense, so be it. Creating a budget is not about forcing yourself to give things up. It’s about arming you with the information to manage towards your most important goals.

Anyway, hopefully this post has made you think a little bit about your budget. Whether it’s spending at work or at home I think just being a little more mindful is a good thing. Happy budgeting!