Financial goals are the second category in my budget. This area accounts for roughly 20%, but varies slightly year to year. This category includes the following:
The third category tracked is my flex spending. This accounts for the lowest portion of my budget as its 30% of the budget. I consider these as wants and not needs, and include the following:
Setting Annual Goals:
I set a budget based on my financial goals for the year. My financial goals drive the percentage of each category year to year. This year I have prioritized saving to acquire real estate for short-term renting as a main goal. I have established a price point that will require 20% down to avoid a PMI. I need an additional $12,000 for the down payment, which would equate to $650 monthly. I am going to set this as a main goal and work my budget around it. This will make my financial goal category percentage increase, respectfully. Once I determine what my financial goals would be for the year, I then set how much I would like to see change in each of my assets and liabilities. An example is shown below:
This sets a measurable goal, which is essential for evaluating progress.
I always remind myself that it is extremely important to try and keep the four common big expenses down. The big expenses are housing, transportation, taxes, and food.
Great! You have read through The Financial Engineer's 1st step of 3 in his money management workflow. Please feel free to read up on the second step, Saving Money