Advice from Labib: Preparing a Budget

Advice from Labib
Preparing a Budget

If you have recently entered into retirement, or are planning to soon, you may need to review your pattern of spending. If you have more coming in than going out, save it for future plans, like a dream vacation. On the other hand, if what you spend exceeds your earnings, think of ways to fix the situation and give yourself some breathing room for unexpected expenses.
The following steps will help you create and stick to a financial plan that is right for your needs and goals. Calculate your net monthly income. This should exclude any income taxes or other deductions.
Determine your total monthly expenses. This should include: "fixed" expenses like housing and car payments, "variable" monthly expenses like utilities and food, as well as any revolving debts such as credit cards or lines of credit, with the monthly payments and the current balances.
Depending on how detailed you want it to be, these expenses can be divided into a few or several categories with or without subcategories. Divide out any annual, semi-annual, or quarterly expenses, such as insurance, into monthly amounts. By including these in your monthly total, you will ensure that you will have enough to cover other expenses in the months that these lump payments are due.
Deduct the monthly expenses from the net income. If the amount remaining is a negative number, look at each expenditure again and determine where you can make changes. Consider re-structuring your debt. For example, try consolidating your debts at a better interest rate so you can start paying down that debt a little at a time. Anything extra you have at the end of the month should go towards that.
Once you have assessed your financial situation, list your short and long-term goals and include personal and financial targets. From these goals, assess how much you will need to save each month to meet them in the appropriate time frame. Remember to review your budget periodically and make changes as needed.
