A long-term budget can put you and your family on strong financial footing for the future. Not only do you keep expenses down, you save money for retirement, investments or an emergency. Go over the details of your finances and set financial goals to create the guidelines you will eventually use to design your budget.
Determine a Savings Plan
Set a goal for how much you want to save each month for retirement, personal savings, investments and emergencies. This should be a percentage of your overall income each month and not an actual dollar amount since finances can vary slightly from month to month. For example, a one-time bonus can increase your income during one month. Consider all income when calculating your savings plan.
Track Expenses
Keep track of all expenditures you make over a month. You need at least one month to see patterns in spending and to analyze monthly bills. Include items such as your mortgage or rent, car payments, groceries and utility bills. Add up these expenses and compare the total to your monthly income to get a clear idea of how much money you have left over after spending money on living necessities.
Irregular Expenses
Not all expenses occur monthly. Taxes, auto insurance and service contracts are expenses that occur quarterly, bimonthly or annually. List them and divide the annual cost by 12 to arrive at an estimated monthly expense for these items.
Identify Unnecessary Expenditures
Look over your expenditures to identify unnecessary expenses. You do not have to remove these types of expenditures from your spending yet, but labeling items as unnecessary points out items you can remove from your budgeting immediately if necessary to meet long-term savings goals.
Identify Miscellaneous Costs
Some costs occur on a regular basis but fail to show up on a budget. These expenditures include items most people tend to forget about, such as ATM fees, parking meter fees and debit card fees. While small in amount, these fees add up over time. Identify these types of expenditures over a month to get an idea of how much money you spend on them. You can change your monthly routine to reduce these costs and meet your budgetary goals once you enter the budget-designing phase.
Reevaluate Your Savings Plan
The best budgets are realistic in approach; otherwise, you'll break your budget out of necessity. Once you have all expenditures outlined, re-evaluate the percentage of money you planned to save each month. Change your savings goal based on the information you have. Thereafter, design your budget around your new long-term savings goal.
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Writer Bio
David Montoya is an attorney who graduated from the UCLA School of Law. He also holds a Master of Arts in American Indian studies. Montoya's writings often cover legal topics such as contract law, estate law, family law and business.