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Planning a home budget is among the most important steps any homeowner or family needs to take to ensure their financial health.



Planning a Home Budget

March 20, 2019
By Comerica Bank

Planning a home budget is among the most important steps any homeowner or family needs to take to ensure their financial health. It can be easy to think you can get by without this step. However, the fact of the matter is when you don't have concrete means to tracking your monthly cash inflows and outflows, spending can get out of hand.

Sitting down to plan your home budget can seem like an intimidating experience. Some even avoid the practice because they don't want to look at the hard numbers. Yet there's no two ways around it: home budget planning is an essential task. Not only is a budget central to the day-to-day and month-to-month financial well-being of your family, but it also matters down the road. Trying to start a college savings fund? Looking to secure your retirement? Home budget planning and long-term financial management go hand in hand.

4 steps to crafting a budget

Though a budget may seem like an intensive exercise, it's not all that complex. Planning your home budget can be accomplished in four steps. All you need to do is come ready with the facts and figures:

  1. Add up your monthly income: Your budget starts with what you earn on a monthly basis. If you combine income with a spouse or significant other, then make sure to reflect that in the budget. Leave no source of income out of the equation so you have the fullest picture of your financial situation.
  2. Subtract monthly expenses: Identify all or your fixed monthly costs. Be sure not to omit anything at this step: monthly debt payments, expected credit card payments, mortgage payments, utilities, food and drink, household goods, living essentials, soccer team dues, car insurance, retirement contributions - all of it matters. Not only is this comprehensive accounting important to the numbers but also to your overall understanding of where your money goes.
  3. Factor in discretionary spending: After deducting monthly expenses, continue to subtract your discretionary spending. This refers to all the other extras you might spend on, like dining and ordering out or entertainment. Discretionary spending has a habit of sneaking up on consumers, ballooning by the month's end if unchecked.
  4. Make your adjustments: If you have leftover money, good, that can be put toward savings or debt; if your figure is negative, it's time to make changes. If in the latter camp, start with adjusting your discretionary spending. Cutting back on takeout can save a lot more than you might think. Also, consider your monthly expenses: Would a smart thermostat help control energy costs? Can you consolidate debt or refinance student loans? Even if you're in the black, planning a monthly budget can clue you into new areas where you can save.

How home budget planning is linked to long-term financial management

Budgets have evident use in the near-term. Segmenting your spending categories while planning a home budget gives you precise insight into your financial health. However, it is important not to forget their value outside the immediate time frame, as your long-term financial goals and objectives are all part of the same budgeting conversation. 

While long-term financial planning is undoubtedly different from home budget planning, there are intersections between the two. For instance, it helps to know what monthly retirement account contributions you make as you plan out the golden years and what you will need to live comfortably. If you need to increase those amounts, finding ways to trim discretionary spending through a home budget plan is a simple way to prioritize long-term goals. When you have a home and family to look after, the links between near-term budgeting and long-term financial well-being are clear.

The same workflow can be applied to any type of savings families want to increase or establish. Emergency funds are necessary to maintain, but often at the very end of the considerations list. College may seem incredibly far down the road, but wait too long to start saving and challenges arise. When you have a full picture of your current finances and your future goals, you can more easily marry the two: And it all starts with planning a home budget.

If you are looking for professional help to align your spending and financial means, as well as plan for long-term goals, talk to Comerica Bank today. Getting further personal financial advice can help you make the most of your budget. When you are saving to apply for a mortgage or another type of loan, there is no greater benefit than knowing how it factors into your monthly spending. Start your home budget today, and consider contacting us for more information on how we can help plan your personal finances in other ways.

 

 

This information is provided for general awareness purposes only and is not intended to be relied upon as legal orcompliance advice. 

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.