Using a Budget to Shape Your Financial Future

Most people find the task of putting together a budget daunting and frustrating. They might hope to get through a divorce, or even life, without ever actually preparing a budget.

However, I strongly encourage people to give careful thought and consideration to the task of preparing a budget and to give it their best effort.

No one’s future can be predicted or guaranteed. However, with information and planning, we can create the future we want. A budget is a way to portray what we would like to see happen in the future; it reflects our financial priorities and goals, working within the limits of our available resources.

To estimate your future expenses, you must understand your past. The first step is to gather 12 months’ worth of:

  • bank statements,

  • check registers,

  • credit card summaries, and

  • any other records associate with your bill payments. 

Add the expenses for each category. Remember to include any deductions from payroll, including retirement plan contributions; medical, dental, vision, disability, and life insurances; and gym memberships and dues.

By taking into consideration a full 12 months, you can balance out the impact of seasons on utilities, daily fluctuations in fuel prices, and payment frequency on less-frequent expenses. Pay attention to where payment changes occur so you can incorporate known changes into your budget.

Monthly or regular fixed expenses, such as mortgage, car, and insurance payments, don’t necessarily need a 12-month average because they don’t change. In those instances, the most recent statement will suffice.

It can be helpful to categorize your expenses into discretionary and non-discretionary. (Non-discretionary expenses are those which you cannot do without, such as housing, groceries, and car payments.) By separating the two types of expenses, you can see where you might be able to cut back or delay spending and save money.

A budget is not fixed for life. You will want to look at your budget again after a few months to see how things are progressing and make any appropriate revisions. We must be ready to adapt to life’s changes.

A budget can be a great tool to keep you prepared and help you shape the future you choose.

Susan A. Moussi, CPA, CFP®, CDFA, CFT

SMD Tax & Divorce Financial Planning Consultants, Inc.

Phone: 614.429.4172