Budgeting Made Easy
By Nick Licouris
Does it feel like every month you’re just scraping by without saving a dime? You aren’t alone. It’s time to review your monthly budget. This may sound like a simple starting place when going over our finances but for many people reviewing their budget often times gets overlooked. Budgeting is one of the most important items to start your financial plan with, as it gives you a visual of the flow of your income. There are many budgeting templates online or if you are tech savvy, check out GK’s My Money Page app (https://itunes.apple.com/us/app/money-page/id905824164?ls=1&mt=8) on your iPhone to help you budget. Monitoring your income and expenses can help you increase your net worth. Here are 4 main categories you should look at when you go over your budget and the amounts recommended to spend in each.
1. Housing Expenses
This would include Rent/Mortgage, HOA, Utilities, Taxes and Insurance/repairs. Depending on your location, this fixed expense per month could be where a big chunk of your income is going. I recommend no more than 30% of your gross income to this category.
2. Car Expenses
This would include Loan payments, Gas, Insurance and maintenance/Repairs.
I recommend no more than 10% of your net income to go to your car expenses.
There can be many different kinds of debts you can incur but the most common two are credit card and student loan. I recommend no more than 10% of your net income to debts.
Your miscellaneous expenses will fall into the variable side of your monthly expenses due to the fluctuation they will have on a month to month basis as well as the ability to reduce your spending can usually come from this section. This would include all other expenses you incur for the month. For example, Clothing/shopping, Dining out, Groceries, Wellness, Entertainment, Travel, Medical Expenses. This area is the biggest place to reduce your spending on a monthly basis unlike your more fixed expenses like your home or car expenses.
So you have all your expenses written down. Now what? By adding it all up, you will either have a surplus in income or a shortage.
If you have a shortage in your monthly budget, it’s time to review where the biggest expenses are coming from. I would suggest starting to reduce the expenses slowly until you are able to get a surplus. Most likely the reduction will be in the variable side of your plan. One less Starbucks a week can go a long way!
If you now have a surplus or started with a surplus, to begin with, that’s great! There are a few things you can do with your surplus to get you ahead on your finances. You can either increase your emergency fund in your bank accounts or invest the extra money for the financial goals that you have. I encourage putting away a minimum of 10% of your gross pay into your investment accounts (including retirement & medium term accounts.) Ideally, being able to save 20%-30% of your gross pay is an excellent goal to have.
This is just a start. Be sure the review your budget every so often to make sure you are still on track!
Securities offered through LPL Financial, Member FINRA(http://www.finra.org/)/SIPC (https://www.sipc.org/).
Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor. Gerber Kawasaki and Gerber Kawasaki Wealth and Investment Management are separate entities from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures the success or protects against loss.
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