Budget Today to Help Save for Tomorrow

Nicholas Redshaw

April 28, 2024

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At this time of year, people take the opportunity to focus on self-improvement by setting new goals and habits. This could range from improving one’s health to one’s financial goals. For those looking to improve on financial goals, like cutting down on spending, eliminating debt and developing a savings plan creating a budget is a great place to start.

Budgeting is not just about managing your monthly expenses; it’s a powerful tool that can help pave the way for financial stability and security in the future. Whether you’re saving for a dream vacation or your retirement, creating and sticking to a budget is key. The trick is to find out which method is best for you in helping track your finances.

Accredited By:

Nicholas Redshaw
Senior Wealth Planning Analyst
Nicholas Redshaw
TPCP, CFP®

Nicholas plays a vital role in delivering sophisticated planning support to financial advisors, and ultimately their clients. His keen insights and attentive listening allow him to uncover key planning opportunities and deliver comprehensive financial strategies tailored to high-net-worth individuals and families. Nicholas supports several financial advisors, attends client meetings, and takes the lead on detailed […]

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This article has been reviewed for accuracy by Fragasso's leadership team and accredited by Nicholas Redshaw to help ensure the information reflects current financial planning and wealth management principles.

Building Blocks of Budgeting

AFTER-TAX INCOME: Identify all sources of income, including your salary, bonuses, and any other money coming in. Overspending may occur if you use gross income instead of after-tax income. This could create the illusion that you have more money available than you do.

SET REALISTIC GOALS: Define your short-term and long-term goals. Having a clear objective will give your budget a purpose and direction, whether it’s paying down debt or saving for retirement. Being realistic will help ensure you stick with your plan.

EXPENSES: Track your expenses. Understanding where your money is going can help determine where you are spending most of your money and where it might be easier to cut back and save. Categorize your expenses into fixed and variable expenses. Fixed expenses are costs that are the same on a routine basis like mortgage, rent, and car payments. Variable expenses are costs that change over time like groceries, entertainment, and gas.

CHOOSE A PLAN: There are several budgeting methods out there to choose from. Each method suits different individuals. The best one for you should be in line with your needs and financial objectives. Make sure your budget is realistic and adaptable to unexpected changes.

Review and Adjust: Periodically review your budget and adjust to accommodate changes in income, expenses, or priorities. Adjusting your budget allows you to allocate your income to meet your evolving financial situation and goals.

Budget Types

50/30/20
BUDGET

house illustration

50% goes towards NEEDS
Rent/mortgage, car payments, utilities, food, insurance and health care.

__________

30% goes towards WANTS
Vacations, dining out, entertainment, and non-essential items.

__________

20% goes towards DEBT AND SAVINGS
Paying down credit card debt, building an emergency fund and making contributions to an investment account.

PAY YOURSELF FIRST
(REVERSE) BUDGET

dollar sign bag illustration

PRIORITIZES SAVINGS UPFRONT
rather than saving from money that is left over.

__________

Contribute to your retirement
savings plan.

__________

Set up automatic transfers.

__________

Budget remaining income.

ZERO-BASED
BUDGETING

document illustration2

ASSIGN EVERY DOLLAR
to a specific purpose.

__________

Income minus expenses should equal zero.

__________

Remaining money can be allocated to debt repayment or additional savings.

Budgeting is an ongoing process that requires regular attention and adjustments. It’s a skill that improves with practice but can feel overwhelming and complicated. It doesn’t have to be. We at Fragasso Financial Advisors are here to assist you on your path to a successful financial future. If you need help preparing a plan for your financial goals, please reach out to your financial advisor, and they will help you create a plan that best fits your financial situation.

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