To be prepared for a bright future—as well as the unexpected—careful financial planning is essential not only for businesses but for individuals. It’s not just about saving for retirement, either. Having a well-thought-out budget also allows you to pinpoint where you may be spending more than you’d like and make wise decisions when it comes to big-ticket purchases.
For those new to the art of budgeting, getting started can be the most difficult step. Below, 16 financial experts Forbes Finance Council share smart, novice-friendly tips to help.
Members of Forbes Finance Council share tips to help newcomers to financial planning get started.
Photos courtesy of the individual members.1. Understand the expenses associated with your current lifestyle.
Before you can properly develop a financial plan, it’s critical that you understand your current living expenses based on your current lifestyle. It’s hard to make incremental changes until you understand where you are right now. - Meredith Moore, Artisan Financial Strategies LLC
2. Document your monthly expenses.
A financial plan can start with something as simple as documenting your monthly expenses—utilities, mortgage, insurance and so on—in a spreadsheet. Sum the expenses for each month to determine your monthly obligations, and average the expenses by line so you can estimate the average cost of each item. Then, compare your expenses with your income, and be diligent in paying down the highest-rate obligations first. - Sheryl J. Moore, Wink, Inc.
3. Gather several months of data.
Make sure you begin with good data. Before you start to plan, keep track of all expenses—cash, credit card and banking transactions—for several months. In this way, you can see how you are spending your money over time. In addition, I encourage people to be more conservative than necessary. For example, build “padding” into your budget for miscellaneous or unknown events that will inevitably occur. - William Lieberman, The CEO’s Right Hand
4. Get a bird’s-eye view of your finances.
Compile all your accounts and bills in one place so you can see your entire financial picture. By tracking spending, debts and assets in one place, you can make more informed decisions about short-term spending and long-term goals while easily making adjustments as things evolve. - Marthin De Beer, BrightPlan
5. List your debt and income sources.
In my experience with entrepreneurs and investors, making a plan is simple. It’s like using a map: To get to your goal, you must know both your current location and your final destination. Taking a sober look at your current financial position by listing your debt and income sources, as well as your goal at a specified time, sets you in the right direction. Review it monthly and modify it accordingly. - Dr. Betty™ Uribe, Effectus Enterprises, LLC dba Dr. Betty Uribe
6. Inventory your assets each year.
Take inventory of your assets at the end of each year to make sure that your financial assets are higher than the previous year. This requires looking at how much you put into savings each month. However, if you invest in the stock market and your year-end assets are lower, stick with your stocks and your plan—historically, 100% of downturns have proven to be temporary. - Robert Zuccaro, Target QR Strategies
7. Keep a rolling budget and forecast.
You can’t expect to foresee every obstacle in your financial future, so make sure to keep your budget flexible, not only relying on the numbers you see in front of you but also allocating funds for surprises. Keeping a rolling budget and forecast will keep you on top of the positive and negative fluctuations that are bound to happen. - Roy Ferman, Seek Business Capital
8. Balance short- and long-term goals.
If it’s your first time developing a financial plan or budget for your company or yourself, make sure that you balance short-term and long-term goals. While it’s tempting to fixate on the upcoming fiscal year, it’s critical to understand your long-term goals so that as you plan for today, you are also making progress toward your tomorrow. - Sonia Webb, Avanade
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9. Follow the 50/20/30 rule.
I always recommend—and personally stick to—the 50/20/30 rule. Spend 50% of your after-tax pay on what you need. Spend 20% on things that you want, then use the remaining 30% to add to your savings and investments or to pay off debt. - Sean Brown, YCharts
10. Set up separate bank accounts for different purposes.
One account should be used for normal monthly expenses. This is where the bulk of your paycheck should go, and preferably you’ll pay recurring bills via auto-debit. Another account should hold any bonus or extra money for a rainy day or a big expenditure. A third account is the one you pull cash from weekly. Feed all these accounts via automatic payroll deposit, and then adjust deposits as needed. - Chris Tierney, Moore Colson CPAs and Advisors
11. Pay yourself first.
Don’t be shortsighted! Pay yourself first. Save money in a retirement account and cut your discretionary spending first. Simultaneously, find ways to grow your income. In the gig economy, there’s no shortage of ways to earn extra money and learn new skills. - Mark Paller, Paller Financial
12. Leverage dedicated budgeting apps.
Setting up and sticking to a budget is like dieting: If you set unachievable goals or, worse, nonspecific goals, it will be hard to stay the course. To keep yourself accountable, I recommend using Mint, PocketGuard or another budgeting app to track your budget and daily spending habits. Don’t worry if you miss your goals. Like dieting, taking action when it comes to your finances is half the battle. - Catherine York Powers, Constant AI
13. Be sure to maintain emergency funds.
Always keep an emergency backup fund, and save as much as you reasonably can. There are so many amazing and innovative ways to save and invest—the rapid rollout of fintech offerings can really motivate you to save, set goals, invest and more. Prioritize a variety of savings accounts for emergencies and goals—whatever motivates you. - Julio Gonzalez, Engineered Tax Services Inc.
14. Decide on a fixed amount to save each month.
All financial plans start with the same thing: money. Budgeting for and planning how much of your income you will save is a key foundation of any financial plan. Using a percentage of income or a fixed dollar amount each month is an easy way to get started. And don’t forget to increase these savings amounts as your income increases. That can help prevent an unexpected shortfall in the future. - Will Duffy, WD Wealth Strategies
15. Don’t try to make it perfect.
Do not let perfect be the enemy of good. Your budget will never be perfect—life has a way of throwing us curveballs, so do not let perfection keep you from getting started. An easy way to begin that avoids combing through all of your bills is to take your net income and subtract any regular savings. The remainder we can assume is your spending, which can be refined as you move forward. - Matt Masterson, RegentAtlantic
16. Find an advisor who specialized in goals-based planning.
First, define and prioritize your goals. This will help put financial decisions into perspective. Work with an advisor who specializes in goals-based financial planning and has the right technology and calculation engine behind the scenes to run easy-to-navigate options and scenarios for you. - Kirk Badii, Badii Group Private Wealth Management
