May 2012

How to Create a Budget

May 1, 2012

By Debra Taylor, Senior Vice President and Regional Manager, Union Bank, N.A.

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Creating a budget can be a fun, empowering process that can help you crystallize your financial goals and help you stay on track to achieve them.

First, it is important to determine your short- and long-term goals. Short-term goals include taking a special vacation or creating a cash reserve for unexpected expenses. Long-term goals may include building a retirement nest egg, achieving financial freedom and creating wealth to pass on to your heirs. Paying off debt is another important goal to consider.

Next, collect your pay stubs, cash receipts and tax, bank, credit card and investment account statements and record your monthly income and expenses in two separate columns. Your expenses can be categorized as fixed -- unchanging expenses such as car payment and mortgage or rent, and variable -- changing expenses such as groceries, utilities and gasoline. Since your variable expenses differ each month, determine the average cost for each and insert the amount into your expenditures column.

Tally your income and expense columns to determine where you stand financially at the end of the month. Do you have more in your expense column or income column? If your income column exceeds your expense column, consider allocating the extra money toward the priorities you established when setting your goals. These may include reducing debt and saving more.

If your expenses exceed your income, review your spending habits with a critical eye. Determine which items are truly “needs” versus those that may fall under the category of “wants” (entertainment, dining and gifts). Trim the nonessentials until you can create a budget that incorporates your goals without leaving you in the red each month.

Once your budget is complete, consider these tips to help you maintain your goals:

• Revisit your budget. Don’t hesitate to review your budget monthly to determine if your finances are in line with your financial goals and if you are spending more than anticipated. If so, refine your budget and find new ways to cut costs. Reviewing your budget regularly will create a good habit that will serve you well during better times.
• Get creative. If you find that you don’t have many “wants” that can be trimmed from your budget, consider getting creative with items that fall under the “needs” category. Consider saving on groceries with coupons, buying generic brands and bargain hunting for discounted necessity items.
• Be flexible. If your budgeting plan needs reworking, consider using personal finance software specifically designed for budgeting or consulting with a certified public accountant or a trusted financial advisor.

Creating a budget is vital in helping you really understand where you are spending your money and how you can properly manage your finances and plan for the future.

The foregoing article is intended to provide general information about budgeting and is not considered financial or tax advice from Union Bank.  Please consult your financial or tax advisor.

Debra Taylor is a senior vice president and regional manager for Union Bank, N.A.  Union Bank, N.A., is a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies, and major corporations. The bank operates 407 branches in California, Washington, Oregon, Texas, New York and Illinois, as well as two international offices. UnionBanCal Corporation is a wholly-owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a subsidiary of Mitsubishi UFJ Financial Group, Inc. Union Bank is a proud member of the Mitsubishi UFJ Financial Group (MUFG, NYSE:MTU), one of the world’s largest financial organizations. Visit www.unionbank.com for more information.

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