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

The first building block to any successful financial plan is a budget. Regardless if you are earning a six-figure salary or if you are living paycheck to paycheck, staying in control of your finances means knowing where your money is going on a regular basis. Budgeting is about creating a spending strategy not about restricting your expenditures; understanding how much money you have and planning how to best allocate those funds. To quote John Maxwell, “A budget is telling your money where to go instead of wondering where it went.” Taking the first step forward and creating a spending plan is usually the hardest part. The tips below can help you continue your progress with taking control of your finances.

1. Why should you create a Budget?

Though it may seem like a tedious financial exercise, putting together a budget can help you keep your spending on track. It may help you discover some hidden issues with cash flow. Your plan may find you ways to free up more money for other financial goals such as paying off student loans and other debts or adding to savings. Your spending plan should allocate every dime on paper, before it is actually spent.

2. What are your goals?

Putting pencil to paper or fingers to keyboard is usually the hardest step to creating a budget. But before you do that much, you must create some goals for your spending plan, both short term (3 months – 1 year) and longer term (2 years – 5 years and beyond). Are you trying to make it through each pay period, start an emergency fund, or add to a vacation fund? In the longer term maybe you would like to purchase a house, a newer vehicle, save for retirement, or for a child’s education. Your spending plan needs to be built around your financial goals to make it successful.

If you have a significant other, it is best that you both discuss the goals and find a way to come to an agreement for the budget. Working together will make your spending plan successful.

3. Income versus expenses, take a good assessment.

Understanding your current household income and expenses is a key piece to creating a realistic budget. It is important to know not only what money you have going to your primary expenses (housing, car, groceries, etc.) but also where you spend the rest of your money each month. Whether it is paying the rent or mortgage, the electric bill, or buying a can of soda in the vending machine, tracking these items in a Spending Diary can help you document every penny of your income and where it is spent for the month. Using this diary you can identify areas that you may be spending more than you thought; for example that daily cup of coffee, and show you some of the items that may need to be adjusted or watched more closely.

Having a good picture of your own spending habits can help you create a realistic budget that truly fits your needs. It will assist you in determining your priorities when it comes to where your money should be going or where you would like it to end up.

4. Write it down.

You can find numerous worksheets, programs, and budgeting “apps” for putting this plan in action. Find what works best for you. The strongest suggestion would still be to write it down with pencil and paper. Have it visible to you and your significant other to see regularly, and make adjustments as necessary. Any major adjustments should be agreed on by all parties before being implemented.

Some websites to obtain budgeting worksheets and suggestions would be:

5. Use cash to help control spending.

With both credit cards and debit cards, we can complete a purchase in a matter of seconds. That convenience can come with a cost. Using only plastic we can begin to lose track of how much money is actually being spent. Five dollars here, ten dollars there, does not seem like much at the time of purchase, but if you are not careful those small expenditures can add up to a lot more than your planned budget. A way to help keep your daily spending under control is to use cash instead of your credit or debit cards. It may not seem as convenient, but it helps you visualize just how much money you’re actually spending. Seeing what is leaving your wallet can help deter you from some of the extras you did not think about spending on before.

6. Allow time for the plan to be successful.

The spending plan you create will most likely not be perfect the first time around. It will require some modifications over time based on experience to really become effective. As you become more experienced with your budget, you will be much more confident with your money and with the prioritization process of where it will be spent. And you will find yourself on the path to achieving the financial goals you have set for you and your family.

To summarize:

· Have goals (short and long term) for your finances. Create your plan around the goals you have determined.
· Know your income and expenses. Track them with a Spending Diary.
· Write your spending plan down on paper or in a program or app that works for you.
· Try spending in cash to add in some additional control.
· Give it some time to work. Make changes as needed, but stick with your plan.

Please feel free to contact me if you have any questions or suggestions that have worked for you. If there is a specific topic you would like to hear about, please let me know. I am based at the Keiser University Jacksonville Campus and can be reached at (904) 296-3440 extension 139, or