Budgeting Made Easy

You’ve built the perfect budget.  You are able to pay all your bills and have enough left over to save for your kid’s college and invest.  Now, you realize you will need a new car soon, so you want to save instead of finance.  How do you work in that new savings goal into your budget?

You have a few options.  It depends on what you are willing to give up and what you want.  If your goal is a couple years away and you want to save a lot of money each month, you’re going to need to take more drastic measures than if you had more time and only needed a small amount of savings each month.

If the amount you need to save each month is the same amount as how much leftover you have to invest, you should try to cut back on other expenses as well, especially if the investing is your only savings for retirement.

For example, let’s say you bring in $4,000 a month.  $3,000 is spent on bills, food, etc., $100 goes towards your kids’ college fund, and the remaining $900 goes to investing.  You want to save $24,000 in 2 years towards a new car which means you’ll need to save $1,000 a month.  If you have a 401K where you’re contributing 5 to 10 percent, it would probably be okay to use the whole $900 and then cut expense by $100.

If you don’t have a retirement account and the $900 to investment is your retirement, cut it down to maybe $500 or so and cut the remaining $500 from expenses.  If this is still unreasonable, consider buying cheaper car or waiting longer to buy a car.

It’s really all about fitting everything in.  You just have to mess around with your budget and goals for a while.  Obviously, the more money you make, the easier it is, but that’s not always plausible.  Think about it and try to cut here and there without sacrificing too much.

Most people will be tempted to just cut down the investment money, but that would be robbing from your future.  Keep in mind that you will need to have some source of income when you retire in order to sustain yourself.