Budgeting to help fund your financial goals
Part of our build your own financial plan series
One task. Once a month. This is the year to get your money in order.
This is the 2nd story in a series about how to create a personal financial plan. Check back each month and we’ll help you with another step in the process.
You’ll do some tax planning, set up an emergency fund, plan to reduce your debt, and more. Before the end of the year, you’ll feel smarter and more confident about your money.
- Short-term goals—6 months to 5 years
- Mid-term goals—5 to 10 years
- Long-term goals—more than 10 years
And you noted current savings you have toward each. So if you’re short of money you need toward a goal, how do you fund it?
You free up money by taking a closer look at … yes, the dreaded “B” word. (Budget.) Where can you cut back? What are your priorities? Because when you can “find” extra money to save and invest—and potentially grow—goals can become more attainable.
Why you need a budget, even if you don’t want one
Some people resist doing a budget because they think it’s going to restrict them from spending the way they want. Or they don’t want to face the reality of overspending.
Don’t go there. Just think of it as your monthly cash flow and a saving/investing plan. Give yourself permission to decide where and how you spend your money.
Before you can start, you need to know what’s coming in and where it’s going. Then, pay yourself first. Or think of it as paying your “goals” first … meaning, save and invest toward the goals you set. The rest of the money is yours to decide how to spend.
So, let’s get started.
- Use our downloadable budgeting to fund your goals worksheet (PDF) and jot down your numbers. Look at recent bills plus bank and credit card statements to give you the facts. (Be realistic. No cheating.)
- Adjust. Prioritize. Revise, as needed. (Fixed = bills you’re committed to paying. Discretionary = you have some control over what/how much you spend.)
- Make note of your monthly take-home pay. Subtract your new/revised budget. See what’s left that you could put toward your goals.
- For each of your goals, check whether it’s fulfilled or needs more funding, and if it’s a “critical” goal.
- Decide how much of the extra money you’ve found could be put toward your critical short-, mid- and long-term goals. Log it on the worksheet. Once you’ve made good progress toward the critical goals, start tackling the rest of ‘em.
Budget still coming up short?
Don’t panic. We’ll continue to look for ways to help you adjust your spending and saving throughout the year. For example, next month’s story in this series will focus on tax planning.
In the meantime, here are a few stories that may inspire you to think about your budget in new ways:
- Get your budget back on track: simple ways to save more.
- $100 a month: save to give yourself a raise.
- Waste less, save more: how to reduce your spending.
More income … can mean faster progress
Of course, more income helps, too. Lots of people have a side hustle for extra money. Maybe you can teach a community education class about container gardening, make funky furniture for local art fairs, or rent the guest room in your home as an Airbnb host. Search online for "side hustle ideas" to get started.
Is now the time to ask for a raise at work that you feel you deserve?
If you’re considering a job or career change, will you have a higher salary? That could help you meet your financial goals faster. Well, as long as you don’t change your standard of living and actually put the extra income toward the college fund for your kids, the beach vacation with your friends, or the credit card you’re paying off. (Whatever your goals are.)
- Can you contribute more to your 401(k)? Use our Retirement Wellness Planner to help see if you’re on track with your long-term goals for retirement, and adjust your saving and investing as needed.
- 4 signs you and your budget are ready to invest. How will you know you’re ready to start investing? Maybe you already are and didn’t even know it. Here are signs to help you know for sure.
- Saving at every stage: Tips for your family’s financial plan. Families take on many shapes and sizes. These tips can help you spend (and save) smarter no matter where you are in life.
The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.
Insurance products and plan administrative services provided through Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Principal Life, and Principal Securities are members of the Principal Financial Group®, Des Moines, Iowa 50392.