United Way of South Wood & Adams Counties’ Financial Stability Coalition encourages all community members to adopt new financial habits in 2021 by creating and reviewing their household budget.
“Creating a household budget can be a daunting task under normal circumstances. Adding in the challenges of COVID-19 uncertainties can make budgeting seem impossible” says United Way’s Community Impact Director Jodi Friday. “The Financial Stability Coalition has compiled resources and tools to help you draft your household budget” continues Friday.
A budget, also called a spending plan, is simply a plan you create to help you meet expenses, repay debt, create savings and spend money the way you want. A good spending plan can help you stop “spending leaks” – spending money without thinking. “Creating a budget can be done using these steps” says Financial Stability Coalition member Jackie Carattini, Extension Wood County’s Human Development Educator.
- Determine money coming in - How much money are you making? Paychecks, tips, child support, alimony, scholarships, social security and other cash benefits are all income sources. When factoring income, consider using net income (income after taxes).
- Track money going out - Where does your money go? You probably know about how much you spend on regular monthly bills, things like housing, utilities, groceries, fuel and loan payments. It may be surprising what you spend on irregular purchases like gifts, entertainment, meals and lattes. Start a new habit in 2021 – track your spending. There are several ways to track your spending: add it to the notes section of your cell phone, download an app, jot it down in a notebook, keep your receipts, write it on a calendar or track it with a computer program.
- Set goals – What is important to you? Make both short-term and long-term goals. Short-term goals may take no longer than one year to accomplish, things like building a cash reserve or saving for new appliance. Longer-term goals may take many years to accomplish, such as buying a house, funding college education or building your retirement account.
After you’ve determined your income, tracked your expenses and set goals, you can develop a spending plan. If you find that your monthly expenses consistently outpace your income, you may need to adjust your habits. Extension’s Carattini states “If you spend $3 per day on a latte, you are spending over $700 annually on coffee. This ‘spending leak’ could be allocated to other expenses or towards a savings goal.” Carattini offers free one-on-one financial coaching and monthly Zoom sessions on the second Tuesday of each month, called “Cutting Back & Keeping Up When Money is Tight,” which may be especially helpful during these difficult times.
Budgeting is a key financial stability skill for everyone. It’s never too late to give budgeting a try; nor is it ever too early to learn to budget. “Any habit formed and practiced at an early age follows you through adulthood” says Financial Stability Coalition member Eric Siler, Career & Technical Education Coordinator for Wisconsin Rapids Public Schools. Siler continues “The impact of learning and mastering how to budget at an early age is an investment that will last a lifetime.”
While during trying times it can be a challenge to think to the future and your retirement, it is important to remember that in terms of retirement savings, every dollar will help. Financial Stability Coalition member Erin Van Asten, Assistant Vice President, Retirement Plans at WoodTrust Bank says “The Power of Compound interest tells us that the sooner a dollar can be invested, the more time it has to grow and compound.” Van Asten adds “Even contributing 1% into your employer-sponsored retirement plan or $10 a month into an individual retirement plan account will help you in decades to come.”
“Start the year off right by making a household budget” urges Friday. She continues “Making a habit of creating and regularly reviewing your budget can have positive effects on your finances.” For more resources and tools on budgeting, please visit https://www.uwswac.org/budgeting-basics-2021