Budget – It Pays to Know
The decision to buy a home is one of the most significant financial commitments many people will make in their lifetime. My wife and I purchased our first home in March of 2022 and recently have been keeping our eyes open for prospective homes that may offer more of what we are looking for long-term. This has led us to sit down at the dinner table once the baby is asleep, and re-evaluate our spending habits and current budget, as we look at what a larger monthly payment may look like. Here are a few things to consider when it comes to managing your income and expenses.
Know where your money is going.
It is critical to have a firm grip of your personal cash flows. Tracking your expenses monthly can be helpful in allowing you to make informed decisions. After we totaled our fixed expenses (current mortgage, insurance, daycare, etc.), we were unpleasantly surprised to discover how much we were aimlessly spending elsewhere when we assessed our credit card and bank statements. We were able to cut out an easy 2-3 regular weekly/monthly purchases and get ourselves back on track!
No one budget is the same.
We all see the financial influencers of social media saying you must budget this way or that way, but that is certainly not the case. There is no app, spreadsheet, or specific manner to track your income and expenses in a perfect way. Whatever works best for you to ensure you maintain a balanced or positive cash flow is what you should aim for.
Know your why.
While there are several reasons to budget your income and expenses, they can change over time or have different levels of importance in different stages of life. Maybe you are saving up for a down payment for a car or house, maybe you are budgeting so you can pay for college expenses for your children, or just trying to live below your means so one day you will be able to retire comfortably. Being able to pay down high-interest debt is another great reason for budgeting. Whatever the case, budgeting allows you to take control of your financial situation and make the best decisions possible for you and your family.
Budgeting can seem daunting and even tedious at times. Try to be realistic and give yourself some grace if you do not meet the budget parameters you set every month. Being consistent over time is far more important than being perfect within your budget. Summer will soon be upon us and is often a season of increased spending. I encourage you to take a step back and see what your monthly inflows versus outflows look like to ensure that you are living within your means. This is a sure-fire way to promote healthy, long-lasting financial habits.
Hayden Schilling, CPA is a staff accountant for Keller & Associates CPAs, PLLC.
Published in the Victoria Advocate.
