Budgeting Overview

Is a Budget Worthwhile?

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Have you ever groaned when you’ve heard the word, “budget”?

If you have, then don’t ever again.

Understand that an effective budget DOES NOT deny us all of the pleasures of living.  It helps us to get more of what’s really important to us in life, not less of it!

Any company that realistically expects to be financially solvent one year from today, or five years or fifty years from today, operates on a budget.  Even a small business develops an annual budget, and throughout the year compares actual income and expenses to what was budgeted, making adjustments as needed.

Do YOU want to still be “in business” one year from today, or five years or fifty years from today?

Most households do not employ full-time professionals to handle our money, so it’s up to us.  Yes, it takes some effort – both our time and thought.  But considering the payoff, most people eventually conclude that it was well worth it.

It’s been said that if you fail to plan, then you plan to fail, and there’s a lot of truth to this!

No one of us knows exactly what the future holds and, as life happens, even the most detailed and insightful plan can fail.

Nevertheless, we are more likely to succeed with even an imperfect plan than with no plan at all!

Set Your Financial Goals

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A SMART goal is one that is Specific, Measureable, Attainable, Relevant, and Time-bound (see Wikipedia explanation).  You determine what is relevant (meaningful, important) to you, and a financial goal is attainable if you are able to plan in your budget the necessary amount to set aside each month (or each pay day).

For example if you want to (relevant) establish a short-term emergency fund (specific) of  $1,200 (measurable) within six months (time-bound), then you would set aside at least $200 per month toward your goal.  So far, your goal is SM_RT.

If you cannot realistically set aside $200 per month, then that goal is not attainable, and you would either lower the goal or lengthen the time frame to achieve it.  For example, you might set aside $100 per month for 6 months to reach a lower goal of $600, or you might maintain the goal of $1,200 and set aside either $100 per month for 12 months or $50 per month for 24 months.  You now have a SMART goal.

The Apprisen Savings Goals Worksheet will help you to think through the process.

The Budget

A spending plan – or budget – is a powerful tool that many people use for taking and maintaining control of their money. It can help you identify and direct money toward the achievement of your goals. Just as financial SMART goals are based on individual needs, wants and circumstances, no two people or households will have identical budgets.

Spending plans guide decisions, and they should be flexible enough to accommodate changing circumstances throughout our lives. If you are committed to using your spending plan as a tool for achieving your goals, you are more likely to achieve them.  Every household member who earns money or spends it should be involved in the entire process.

Some experts suggest that you track expenses for a period of three consecutive months.  I’d say put your heart into for at least one month – track accurately and thoroughly – and you may very well have an eye-opening experience and be excited to continue.  But if the thought of continuing for another month seems exhausting or overly burdensome to you, there is no reason why you can’t do it again in three or six months and then check if you’re still on track.  GreenPath has a short YouTube video, “5 Steps to Better Track your Expenses” and the FDIC has a Daily Spending Diary


Review your spending records and your financial goals, and preview the checklist below.  If you plan to have your work reviewed by a counselor, then you should include both a detailed budget and a written summary of relevant information.  For example, the budget summary should include information such as the number of adults and children in the household, whether the children are school age, the number and ages of cars, and mention of any other circumstances that affect either income or expenses.  Also include an explanation of how the spending plan supports each of your personal financial goals.

If you are developing a budget as a classroom exercise, your instructor may assign a scenario or two, so that you don’t have to disclose your personal information.

Since there are 52 weeks per year rather than 48, any income or expense that occurs weekly is to be multiplied by 4.3 (rather than just 4) to arrive at the monthly estimate.  For example, a car payment of $100 per week would amount to about $430 per month.

For income, use such as child support only if it’s regularly received, and do not count on such as a holiday bonus or tax refund, even if you’ve received a large one every year in the past.

  • In every budget, income should equal expenses, that is, there should be no surplus or deficit.
    • If your initial budget results in a surplus, then determine what you want to do with the money – save it, spend, or give it away.
    • If your initial budget results in a deficit, then plan in detail how you intend to increase income and/or reduce expenses to balance it.
  • If you carry credit card debt from month to month, include your plan for paying it off.
  • If you are in school now and graduating soon, you should also plan for repayment of student loan debt, if any.

In your budget, plan for every predictable expense such as car and home maintenance.  Unless you have already built a substantial emergency fund, then your budget should also include a fixed monthly contribution for that purpose.

An emergency fund is not to be used for predictable expenses such as new tires; it’s for unforeseeable events such as a car insurance deductible following an accident.

Do not rely on credit cards or other borrowing for emergencies.

Emergency Savings 

For many years the standard advice has been to build an emergency fund to cover three to six months of expenses but, from what I’ve seen, a goal of six to 12 months is not unreasonable.

Nevertheless, for many Americans living paycheck to paycheck a goal of even three months may seem unreachable, so just start where you are.

A first goal might be $500 if you rent your housing and use public transportation, or $1,000 or so if you’re a homeowner.  When you reach that first goal, then set the next one.

What’s important is to start saving now, a specified amount on a regular basis, even if it’s only a few dollars per paycheck.


  • Your spending plan reflects how money has been spent over the four (or more) weeks that you tracked your expenses.
  • Spending includes savings (pay yourself first).
  • Expenses are listed in appropriate categories: fixed, flexible or occasional/periodic.
  • Spending plan is balanced so that total income equals total expenses.
  • Spending plan contains realistic data for your current and near-future circumstances.
  • Your spending plan supports each of your personal financial SMART goals.

Additional Resources:



Each of us has our own individual strengths and weaknesses, and over these we have a great deal of control.  There are outside forces over which we have little or no control, and the best that we can do is to control for them.  The serenity prayer always comes to mind when I think of a SWOT analysis.