Originally published in Hancock Clarion
January 2022, Wade Gaynor

With the beginning of a new year, friends and family are making resolutions to improve in various areas of life. Many of us have financial goals, such as paying down debt, purchasing a vehicle or home, padding an emergency fund or investing. A personal or household budget can help you reach those financial aspirations— but how do you begin?

Budgets can be overwhelming, especially if we try to look at all the money coming in and going out for 365 consecutive days. Instead, focus your budgets incrementally, such as monthly, and write it down.

When starting your budget, begin with the money that you actually earn. If you receive a paycheck, calculate your net income, or the take-home pay after taxes have been deducted. Social Security, child support or other outside sources of income can also be considered in your take-home pay, but never include bonuses or anticipated raises that could come later in the year.

The next step is to consider your fixed costs. Fixed costs are those reoccurring expenses that aren’t changing. Examples of this are rent or mortgage, insurance, car payments, some utilities, tithing and gym memberships. By this point, a considerable chunk may have taken from your monthly income.

Now, we need to consider variable expenses. Variable expenses are those costs that are inconsistent month-to-month. Groceries, gas, personal care, pet expenses, car or home repairs, medical copays and entertainment fall into this category. Try and estimate how much you will spend per month on each variable expense. This can be difficult. We typically don’t purchase gifts in January like we do in December. Grocery bills tend to be higher around Thanksgiving and the Super Bowl. Looking back over bank and credit card statements for the last two to three months can help give you the most accurate view of how much you spend in these areas.

Different events affect our variable expenses. During the pandemic, Americans didn’t spend as much on entertainment like eating out or going to the movies as they did at the grocery. The storms of life and the unforgiving floods and tornadoes of late remind us of the importance of an emergency fund and savings. How much a young, single person should strive to save will not be the same as a household of four.

By now, if your income is higher than your expenses, you’re in good shape. Consider your financial goals—were you wanting to pay off credit cards or student loans? Are you wanting to invest or look toward retirement?

If your income is less than your expenses, try to reevaluate your variable costs. What can be cut? Adjusting variable expenses can come with lifestyle changes. Maybe go out to eat less and cook at home more, cancel the streaming subscriptions or gym membership and enjoy the outdoors more.

One helpful tool to get a complete snapshot of your finances is the Independence Bank Personal Finance Manager through digital banking. It allows users to combine accounts with external accounts to understand your overall spending habits, set a budget, track your expenses and create a personal financial statement. It’s easy to track your progress all in one place. These features are also beneficial to business owners and operators.

Want to know more about budgeting and reaching financial goals? Schedule an appointment with your local financial professionals.

Wishing you and yours a happy and prosperous new year!