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Creating a budget crucial for financial success

As another year rolls around thinking about creating, and sticking to, a budget comes to the minds of many. The thought of putting all those numbers in order can be a daunting task for some but LattaHarris CPA Elaine Turner says creating a budget cannot only be simple, it’s completely necessary for staying on top of things.

“I’m not going to pretend that everything I believe in is exactly how you should do things,” she said. “Each person has their own scenario, but it’s still best to keep track of things.”

Turner’s favorite way to keep track is with the zero-base budget which aims to make sure income coming in and money going out are equal to zero. This creates a balanced flow of finances and helps the user see if and how they are blowing their budget.

To maintain the financial plan, she recommends three simple steps: Be realistic, customize and review.

Be realistic

Turner says staying practical is important in financial planning because some spend more than they realize.

“The most important thing about being realistic is you’re less likely to blow your budget,” she said.

To accomplish this, she recommends looking at previous months’ statements to see where the spending is being allocated and make changes based on what one sees. By staying in tune with the spending and saving, it’s much easier to see where the money is going and why.

She said this is especially important for savings as it allows the opportunity to see how much one can practically save compared to what they would ideally like to save. Sometimes the numbers in the head and the numbers on the bank statements do not match up, but by being realistic and focusing on practicality, that can be made much simpler.

“It’s the best way because it makes sure you put money aside as well, because I think saving money is important,” she said.

Customize

Creating a budget for an entire year seems like a lot of work, and it is. Turner says a way to make this more realistic is to customize it month-to-month. She says a zero-base budget works great in this instance because it allows for recurring items such as electric, cable and water bills and also things that might pop up such as birthdays, Christmas or back-to-school spending. By creating a plan and designating money to certain things, it prevents stress and financial insecurity in the future because those items are already accounted for.

“It always seems that emergencies are less likely to pop up when you’re prepared,” she said.

Turner said this works great also for future projects that need to be saved up for such as new cabinets or a new roof. By creating a line item in the budget and allocating the money to it, the financial security of the project is taken care of.

Review

Taking the time to go back and review is especially important when working with a financial plan that ebbs and flows month-to-month. She said this step is especially important in the case of automatic billing because payments can go up without the user noticing.

“As soon as you get the bank statement, look at it and check it over,” she said. “It just gets you prepped for the next month.”

She said reviewing not only helps the one making the budget but any financial planner they seek out for help in the future. Having a budget is an important step for everyone to take and for those who do not want to do it alone, Turner encourages them to give her a call.

“I don’t know how to farm, I don’t know how to cut hair, but I’m here to help you with your numbers and make your bills less stressful and scary,” she said.