By Ellie Kay, Retirement Expert
Many people would rather babysit teething triplets than set up a spending plan for their monthly income. But paying attention to the details in all areas of our finances can mean the difference between financial stability and bankruptcy. Spending more money than you make without concern for savings is a formula that produces stress and insecurity. It is one of the major reasons marriages fail and people live in a state of constant anxiety.
Yet the solution is simple—spend less and save more. I completely understand that this is easier said than done.
Budgeting is the solution. As a couple or family make it a group effort – be a support system for each other when setting up, and sticking to a budget. If you are single, you may want to get a “money buddy” to have someone to bounce budget issues off of and also have accountability to stay within your spending plan.
To be successful in your financial dimension, you need to get a reality check on exactly what you are spending and determine the best way to decrease the outgo of funds. Most people who are struggling with too much debt run out of money before the end of the month because they don’t pay close enough attention to their bottom line. In their case, ignorance is not bliss—it is a silent but deadly tsunami of rising debt and stress. A budget should guide your daily expenditures as well as help with a balanced financial plan for retirement.
When Bob (my husband, and money buddy) and I first set up a budget, we realized that both of us wanted to have healthy finances, even though we approached money differently. We realized that we didn’t need to go overboard by pinching our pennies so tightly that it strained our relationship and took all the enjoyment out of life. So we allowed for an occasional indulgence, implemented budget-cutting techniques slowly, and modified our plan as needed. As time went on, we fine-tuned some aspects of our budget and then conducted a quarterly check-up to make adjustments that allowed the budget to become a part of our lifestyle.
Couples have cited financial problems as a primary issue in the majority of divorces. Therefore, getting a grip on your family budget could be one of the best “divorce busters” you implement for the sake of your marriage and family.
If you’re married, I highly recommend you begin any budget discussion when both parties are relaxed. Breathe in, breathe out. Drink some warm milk. Have a homemade granola bar. Have another one, and put on some Frank Sinatra or Harry Connick Jr. mood music. Better? Good. Now take your serene mood right into the budgeting process with you.
You can create your own budget worksheet by writing out the following categories as noted on the basic spreadsheet below. The percentages and categories offered here are only guidelines that I have found are realistic and work for most people. For more outline budget tools, go to Elliekay.com
Once you’ve printed out your own chart like the one here (Ellie Kay’s Budget Worksheet), take the following steps:
- Fill in the first column with your current income
- Based on your current income, get the recommended percentages for the second column; this is your goal budget. This can be modified according to your goal budget. This can be modified according to your current expenses. For example, if your spouse has a company car, then the goal budget may not be as much as 15% on transportation. If you are military and live on base, the housing expense may not quite be 30%. The goal budget is somewhat flexible, but the percentages are there as guidelines.
- For the third column, figure out your current spending levels. This is the average you have spent for each category over the last six months. This tells you what you are currently spending and allows you the opportunity to compare your current spending levels with the recommended percentages in each category.
- For the fourth and final column, take your current income and subtract what you are currently spending. This gives you your current spending status and indicates where you are spending over the recommended amount or under the recommend percentages in each category.
- Once you see where you are on paper, then set up a new budget by cutting spending in one area (such as food or entertainment expenses) and increasing in another area (such as saving, tithing, or debt repayment).
While setting up the budget, be sure that you are calculating provisions for debt repayment, a rainy day savings account and a healthy retirement. I believe that a key component for a healthy retirement includes fixed indexed annuities. These are essential to any balanced financial plan that will help secure fiscal health. One of the reasons I believe in fixed indexed annuities is the fact that they are uniquely designed to help you moderate risk and reward as you chart your financial future.
By creating and sticking to a budget, and by reviewing this spending plan with your spouse or “money buddy” on a bi-monthly basis, you will be able to reach your financial goals and attain fiscal health that will carry you all the way into a well-balanced retirement.