It's never too early (or too late) to start down the path of financial responsibility, and the first step toward this goal is the development of a smart, customized, easy-to-follow spending plan.
Building a useful budget begins with the understanding that achieving your family's financial goals starts with gaining knowledge of — and control over — where your money goes. Take a deep breath. It doesn't have to be overwhelming and you will likely feel great about seeing your money go farther and work more efficiently for you!
Start with your Income
This is the easy part. Write down your total monthly household take-home pay from all sources. If you are paid at odd intervals, or have irregular income (like from tips or a side job) estimate conservatively. You can always adjust it later.
Don't include dollars that you aren't sure you will receive, such as tax refunds, year-end bonuses or investment gains. If those materialize you can pay off debt, save for a big purchase or invest for your future.
Identify your Expenses
For a budget to be an effective tool it's important to divide expenses between essential (fixed) and variable (discretionary) expenditures.
Items in the Essential bucket include:
- Housing (rent or mortgage)
- Utilities (phone, water, electricity, municipal services)
- Debt Repayment (car payments, school loans, credit cards)
- Insurance (health, life, homeowners or renters)
- Transportation (gas, insurance, maintenance, repairs)
- Health Care (doctor visits, prescriptions, premiums)
- Food (groceries, not dining out)
Always allocate enough money in your budget so you are paying more than the minimum due on all debt.
The hardest part of designing a budget is capturing all of your variable expenses. Checkbook registers, credit card receipts and using online and mobile banking to monitor your spending are a great source for this information, but if you pay cash for smaller everyday items it's harder to identify where the money is going. When you take cash out of an ATM, try writing down on the back of the receipt the related purchases or tracking your withdrawals through online banking features. You might be surprised at the amount of cash leakage every month.
Items to consider in the Variable category:
- Dining Out
- Charitable Giving
- Personal Care
For the expenses that don't recur monthly, determine the annual costs in this category and then divide by 12 to see how much you should allocate each month for irregular expenditures. Consider setting up a separate account, such as the First Citizens Together Card account, just for these 'extras.'
Manage Budgets: Manage My Money visualizes your spending in "Bubble Budgets" so you can get a better picture of your financial status.
Once you've identified your income and expenses, the power of the family budget kicks in. If your income doesn't cover your expenses, this is the opportunity to analyze where your money is going and make adjustments to meet your long-term goals. This is where you need to spend some time determining what is most important to you, what you really need, instead of focusing on what you want at this moment.
Saving is a crucial way to prepare for the future and provide for emergencies, and budgeting identifies categories where short-term expenses can be controlled or eliminated and money diverted to a savings account. Aim to spend no more than 90 percent of your income each month. That way you'll have the other 10 percent to save or invest. It's never too late—or too early—to start saving for the future.
First Citizens Bank has the expertise and experience to help families achieve their savings and investment needs. For more information on how First Citizens can help manage your money call 1.888.FC DIRECT (1.888.323.4732) daily between 7:00 a.m. and 11:00 p.m. Eastern time.
Account openings are subject to Bank approval.
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank [or its affiliates] neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your situation.