Fort Myers Florida Weekly

Fool’s School

How to Create a Budget

If you want to be financially secure and have a comfortable retirement, you’d do well to have a budget — and to stick to it. Here’s how to build a budget:

Step 1: Jot down any fixed payment you make each month, including rent or a mortgage, loan repayments, cable bills, cellphone plan charges, prescription drugs and gym membership fees.

Step 2: List your variable monthly expenses. Comb through your credit card and bank statements, figure out how much you spent on various categories over the past year, and then divide by 12 for a monthly average. Categories might include electricity, groceries, restaurant meals, clothing, recreation, transportation, travel, gifts, donations, etc.

Step 3: List infrequent expenses. Look for once-a-year and other infrequent payments, such as insurance, dental work, vacation travel, tuition payments and so on. Divide each category’s annual total by 12 to get a monthly cost.

Step 4: Subtract your total spending from your total income. Compare what you’re actually spending each month with what you bring home via paychecks or other sources (such as a side gig or rental property income). If your spending exceeds your income, you have a real problem on your hands. Ideally, you’ll want to be able to cover all your expenses and still manage to sock away 10% or more of your income into savings and investments. If your retirement savings are woefully inadequate, saving 15% or more is wise.

Step 5: Find ways to shrink spending. You’ll probably need (or want) to spend less overall. So take a close look at your spending habits and see what changes you can make. You might slash one major expense, such as your rent payment. Or try a series of smaller changes, like spending less on a hobby, cutting the cable cord and being much more frugal at the supermarket.

Review your budget occasionally, and make changes when necessary. But keep saving what you need to save, and you can achieve lots of financial goals. ¦

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