Back to the Basics: Budgeting

Budgeting is essentially a roadmap for your finances. You need a map to figure out where you’re going and if you will need to make any stops along the way. When you create a budget, you’re doing the same thing.


Here’s how to navigate the map in three simple steps.


Outline Your Goals.


Begin with a blank sheet of paper and write down Year 1, Year 3, Year 5, Year 7, and Year 10. Next, fill in the years with the goals you wish to accomplish. Think about what you want to be doing, where you want to be doing it, and who you want to be doing it with.


Think SMART. S – Specific, M – Measurable, A – Actionable, R – Realistic, and T – Timely.


Create your budget.


Get out your statements for this one. Add up the amounts you spend on:


  • Essentials – (rent or mortgage payments, utilities, groceries, transportation expenses, insurances, all other household bills, and loan payments);
  • Endgame – (future “must-haves” like taking that great trip or having an awesome retirement);
  • Extras – (eating out, ordering in, fun stuff, etc.).


You should be spending 70% of your monthly income on essentials, 15% on endgame, and 15% on extras.


How do you figure out how much you spend on each category? Add them up and divide by your monthly income. (Ex: If you make $5,000 a month and spend $3,500 on essentials $3,500/$5,000 = 0.70 which equates to 70% of your monthly income)


Align your budget with your goals


Maybe when you did the math you realized you were spending too much in one category, but not in another. That’s ok. Take a minute and look at where you are spending too much. Once you figure it out, try to give and take a little to get your numbers more towards the 70/15/15 mark.


Just remember to have realistic goals and create an outline that you will be able to follow. The worst thing to do is create outrageous goals and stress yourself out trying to obtain them. Keep it simple. Planning out a budget shouldn’t be super stressful and obtaining your goals shouldn’t be either.


Stick with the plan, maybe even pivot the plan, but never leave the plan. You wouldn’t veer off your path on the roadmap, don’t veer off on this plan either.


*Information taken from an article on Forbes*


CWM Advisory, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any agency of CWM Advisory, LLC. Examples of analysis performed within this article are only examples. They should not be utilized in real-world analytic products as they are based only on very limited and dated open-source information. Assumptions made within the analysis are not reflective of the position of CWM Advisory, LLC


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