3 Simple Ways to Create a Successful Budget

We're working on something new for you—it's a podcast! Guiding You Forward is a chance to get the professional financial advice you've been searching for. You'll find interviews with some of the most knowledgeable people in the industry, real-world strategies to manage your money and practical advice for just about anything finance related. This episode discusses budgeting:

• Budgeting guidelines

   

• Finding your “why”

   

• SMART goals

There are many reasons why people have a hard time creating a successful budget and sticking to it—or starting one in the first place. They think they don’t make enough money, it’s too restrictive or takes too much time and effort.

The reality is that budgeting can save you money—and anyone can benefit whether your goal is to save for a large purchase or to get more out of a limited income.

To help you find something that works for you, Mountain America Credit Union has put together this guide to budgeting. Let’s get started!

1. How much of my income should I spend on each portion of my budget?

   Everyone’s individual needs will differ slightly. However, the general guidelines are:

    

   • Housing—35%

      

   • Living expenses (including entertainment)—25%

      

   • Transportation—15%

      

   • Debt—15%

      

   • Savings—10%

      

   Your goals and priorities may play out differently. For example, you may choose to live in a “tiny house” and put more of your money toward retirement savings. Or, you may decide that your home is the most important thing and, because you work at home, you only need one car for your family. Consequently, your transportation costs may be lower than this model.

    

   However you choose to divide up your income, remember that a budget is not a one-and-done kind of thing. The most successful budgeters are constantly coming back to their budget and making adjustments. After all, life goes on, right? Things are always changing. Are you making more money? Less money? Do the kids need braces? Adjust your budget to accommodate your lifestyle.

    

    

2. How important is it to have specific financial goals?

   Setting financial goals is probably the most important part of sticking to a budget. Anyone can create a budget, but if you don’t have a reason to stay in the game, you likely won’t have a reason to see it through.

    

   When creating financial goals, it’s important to be specific. Where do you want to be in 2, 5, 10, even 25 years from now? Why do you want to be financially successful? Maybe it’s to send your kids to college, travel in retirement or buy a vacation home where your family can gather for years to come.

    

   Once you understand your personal why, you’ll have the motivation to balance your spending and saving in order to reach your objectives. This turning point will put you on track to success.

    

    

3. How do I decide what my financial goals should be?
   This is a very personal journey. If you’re having a hard time deciding, consider following the SMART goals method. It’s an acronym to help you get where you want to go.

    

   • Specific—What do you want to accomplish? Think about this as a mission statement of sorts. Ask yourself: Who? What? When? Where? Which? Why? Break a big goal, like paying off your debt, down into smaller goals. This not only helps you stay on track, but it also gives you some early wins!

      

   • Measurable—How will you know if you met your goal? Make your goal tangible and results oriented.

      

   • Achievable—This step is meant to inspire motivation and keep you moving in the right direction. Assess whether you have the proper resources, skills or tools to get you there.

      

   • Realistic—Focus on something that makes sense for your current financial situation. You may want to save $50,000 in six months, but that goal isn’t realistic if you only bring home $3,500 a month. Determine what it’s going to take to reach each of your goals and, remember, don’t set the bar too high.

      

   • Time-based—Giving your goal a time frame does two things: (1) It lets you know if you’re getting off track as you come to the half-way mark or three-quarters of the way, etc. and (2) It keeps your goal actionable and provides extra doses of motivation if you need it.

      

      

     Mountain America Credit Union is committed to educating our members on all things finance. Visit our blog, YouTube channel and social channels (Facebook, Instagram and Twitter) to find more helpful information.