Developing a financial plan
Creating a Budget
The key to a good budget is including as much information as possible so you can adequately prepare and plan. It’s important to keep accurate records of your spending so you can see where you can save money and how much you can reasonably spend.
What is your current income?
The first step in creating a budget is to total your income every month. Include only your take-home pay (your salary minus taxes and deductions). Your income may also include tips, child support, investment income, etc.
What are your monthly expenses?
Next, track your expenses. For bills that vary from month to month, use a monthly average. For example, if your cellphone bill is $45 one month and $55 the next, estimate $50 per month. For annual bills, divide the yearly cost by 12 for a monthly figure.
How much of your income should be spent?
Rent or mortgage payments plus your credit obligations should not exceed 35 percent to 40 percent of your gross monthly income (income before taxes or deductions). The amount you owe on credit cards, monthly car payment, student loans, and other monthly payments should not exceed 10 percent to 15 percent of your take-home pay.
Put it in writing.
Document and categorize your expenses. Tally up everything you spend money on. Don’t forget your daily coffee or snacks — those can add up quickly!
Do the math.
The last step in creating your budget is to total your expenses and subtract them from your monthly income.
If you need help setting up our budget, that’s where we come in! Our Personal Bankers can help you organize your expenses and help get you on a path to financial freedom and empowerment. Learn more about budgets and how to create one here.