How to Budget for the Life You Want

Budgeting is one of the simplest yet most effective ways to achieve your financial goals. Unfortunately, it’s a discipline that can be difficult to maintain. According to a recent survey from Penny Hoarder, more than 55% of Americans do not use a budget to manage their hard-earned income. 

One reason people find it difficult to budget consistently is because they view it as a financial constraint. But the truth is that a budget doesn’t limit your freedom—it gives you freedom! Budgeting for the life you want is about being intentional about where your money goes. Creating and sticking to your budget is one of the most effective ways to manage your money and gain momentum for your long-term financial goals. 

Whether you’re creating a budget for the first time or looking to adapt your approach to save for long-term financial goals, here are a few valuable keys to help you create a budget for the life you want to live.

1. Identify Your Goals and Values

Think about what you want to accomplish financially in the next three months, the next year, and the next three years. That will help you identify the steps you need to take each month to work towards your goals. Taking time to consider what matters to you will help you determine how you allocate your budget and invest in ways that reflect your values.

2. Avoid the Temptation to Keep Up with the Joneses

We’re all familiar with the phrase “keeping up with the Joneses” as a way we compare our financial position and measure financial success against that of our peers. However, you shouldn’t let the spending behavior of others influence your own. Comparison can cripple your efforts to budget for the life that you want. The next time you’re tempted to compare your current financial situation with someone else, here are a few principles to keep in mind.

3. Develop Healthy Habits for Tracking Expenses

Creating a budget is often the easiest part, but tracking and managing your budget is where the rubber meets the road. According to Penny Hoarder, 56% of survey respondents said they didn’t know how much money they spent last month. This is a primary reason many people struggle to achieve their financial goals. There are many tools you can use to develop healthy habits for tracking expenses. You can also create your own spreadsheet. Whatever method you prefer, the key is to stick to it.

4. Consider Your Current Life Stage

Budgeting for the life you want requires you to also acknowledge the current life stage you’re in. Taking time to understand your current financial condition and consider what’s ahead is critical. Planning ahead can happen at certain times of the year such as budgeting during the holidays. It also applies to seasons of life. For example, do you have a child in college or headed to school in the next couple of years? Are you in your 60’s and planning for retirement? Your budget should be built with these types of considerations in mind.

5. Prepare for Unexpected Expenses

Failing to prepare for unexpected expenses can be detrimental to your financial goals. This is why we encourage every client to establish an emergency fund that can be used for expenses that aren’t planned. Setting aside money that can be used in case of an emergency is a valuable way to ensure your finances don’t take a devastating hit when unexpected expenses arise.

6. Consider Your Long-term Financial Goals

The final step in budgeting for the life you want is to consider what you want your life to look like when you retire. If there are specific milestones you’d like to reach, such as paying off a home or retiring at a certain age, it’s important to include those in your current budget. 

Create Your Plan for Financial Success & Budget for the Life You Want 

Whether you’re investing for retirement, saving for college, or simply looking to improve your ability to manage finances, budgeting is a core discipline to be more intentional with your money. If you need guidance understanding how to prioritize your budget to achieve your goals, reach out to a financial advisor at Southwestern Investment Group. 


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