Basic Elements of a Budget

Basic Elements of a Budget

Date: October 08, 2019,

Thinking about your financial future can be overwhelming, especially if you are already struggling with debt or making ends meet. At Harvest Financial Planning, LLC, we believe that good financial planning for the future starts with creating a solid budget now. Once you have a budget in place, you can work forward, improving your chances of saving money and investing in yourself and your future. 

Why Does Creating a Budget Matter?

As financial planners, we know better than anyone the importance of a budget. Having a budget in place is important because it allows you to have a better understanding of how much money you have, what your expenses are, and how you’ll be able to afford things in the future, ranging from a new car to your first home to your child’s college education to retirement and more. Indeed, before you start investing in various accounts, planning for retirement, or making other major financial moves, you should know how much you have to spend. 

Basics Elements of a Good Budget

A good budget will take into account a few basic elements; without considering these elements, your budget may be incomplete. Your budget should consider:

  • Income. The most basic element of all budgets is income. You should keep track of how much you make and from which sources. Make a note of both pre- and post-tax income.
  • Fixed expenses. Fixed expenses are those expenses over which you have little control or are unchangeable. For example, your mortgage is a fixed expense; your Netflix account is not. Once you subtract the value of your fixed expenses from your income, you’ll have a better understanding of the third basic element: flexible expenses.
  • Flexible expenses. Flexible expenses refer to things that you want to spend money on but don’t necessarily need. Entertainment is an example of a flexible expense, as is going out to dinner, buying new clothes, or buying concert tickets.
  • Unplanned expenses and savings. Your budget should also consider two other critical pieces: unplanned expenses or emergency expenses (like your car breaking down or having to replace a part in your stove) and savings. These should be two separate accounts. Savings shouldn’t be dipped into if you can help it, even for emergencies. 

By creating a budget, you can work towards a more solid and comfortable financial future.

Our Professional Financial Planners Can Help

We know that managing money doesn’t come easy for everyone, and that’s where our team comes in. At Harvest Financial Planning, LLC, we can help you to create a budget, as well as make other financial moves that are designed to help you achieve financial security.

To learn more, please call our team today or send us a message. We are ready to help you.

*This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

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