Four Keys to Making Your Budget Work Harder

July 3, 2018 By Tyler Zellmer • Relationship Manager

A budget may go by several names: Spending plan, financial blueprint, or my favorite — money maximizer!  Yet, what you call it isn't important. What is important is that you have one. A budget provides a frame of reference and serves as a guideline for making sure your money is working as hard as it can for you. Without it, you're making important financial decisions in a vacuum — a vacuum that sucks up all of your future savings.

Here are some tips to avoid that vacuum, and make sure you are getting the most out of your budget:

1. Keep It Positive.

The main purpose of a spending plan is to help you maintain a positive cash flow, which means spending less than you earn. When your cash flow is positive, you have money left over after paying your bills. What you do with those extra dollars can make a big difference, both in the short term and later on. Ideally, you'll use the money to build financial security by creating an emergency fund and saving for your future. You may have several financial goals, such as saving for a house down payment, college, and retirement. Even with multiple goals, you should make sure you continue adding to your retirement savings throughout your working years.

2. Make it a Treasure Hunt.

So what should you do if you want to take a vacation in a couple of years or upgrade that old couch in your living room? If you'd like to add a splurge to your budget, you can -- as long as you cut back on spending in other places to make up the difference.

You may not be able to do much to reduce your fixed expenses (e.g., rent or mortgage, insurance). But discretionary expenses are a different story. You might be surprised at how much you can save by cutting back on small purchases, such as buying coffee and bagels on the way to work every day.

Going through your spending plan may reveal other ways you can make progress toward your financial goals. For example, instead of being in a hurry to replace the car you just paid off, think about waiting a couple of years. Saving the equivalent of two years' worth of car payments and adding that money to your retirement account could give your nest egg a nice boost. As for that vacation you want to take, think about going off season to take advantage of lower rates. If you set the extra money aside, you might have more to spend on vacations when you retire.

3. Go over your Budget Consistently

Using a budget consistently, and on a monthly basis, encourages you to pay attention to your cash flow. You'll know when you're in negative territory spending more than you earn, and you'll be able to take steps to correct the situation.

A prolonged pattern of overspending without correcting can land you in debt. Instead of using your money to help build financial security, you'll have to use it to pay down the amounts you owe, plus interest. You could be forced to put your financial goals on hold until you're debt free. That might be the best example yet of why you need a spending plan and how it can help you keep your finances on track, splurges and all.

4. Use SNB's Budget Worksheet

Making your budget is a lot easier than you think, especially with the right tools. At Security National Bank, we created a handy budget spreadsheet to help you out. Ready to get started? Download SNB's free budget spreadsheet by clicking the button below.

Budget Spreadsheet (800 KB)

Looking for more budget help? Contact an advisor from SNB Wealth Management to help you plan responsibly for your financial future.