Financial Wellness: The Basics of Budgeting

by Guest | Feb 16, 2022 | Work Well

When we think about our wellness, diet, exercise, and mental health come to mind. In today’s post, we share why your finances should be added to that list – a concept known as “financial wellness.” There is more to cover on this topic than what can fit in a single blog post, so keep an eye out for more information on financial wellness in the future!

A plan for physical wellness might include signing up for a yoga class or doing meal prep on Sundays to make eating healthy easier during the week. A plan for financial wellness includes utilizing tools, as well as developing an understanding of how stress and emotions can play a role in sticking to the plan. Let’s start with one of the most important tools: budgeting. Budgeting keeps track of your income and expenses over a period of time and provides you with information to build long term financial goals, like retirement savings. The elements of a monthly budget include:

• Income (any money coming in, like a paycheck),
• Fixed expenses (things that you need to pay for each month like rent, a mortgage, groceries, credit card bill and the power bill)
• Flexible expenses (things that you don’t have to pay for, but may occur, such as eating out, a Netflix account or buying a ticket to the movies)
• Unplanned expenses (fixing a vehicle or medical bills are examples. You can use past receipts and records to make an estimate of what these expenses might work out to on a monthly timeframe)
• Savings (this includes short term savings that can be used in an emergency, as well as long term savings that might be used to purchase a car, or go towards retirement).

While this can be done easily with pen and paper, using a spreadsheet on a computer makes keeping track and updating your budget much easier. On paper (or the computer), try creating a different column for each category and list all of the items that fall under them. It can be helpful to list items in descending order with the highest dollar items at the top to make it easier to see what is having the greatest impact. Once you have the figures or estimates for these buckets you can put them together to form your budget. First, add up all of your expenses (fixed, flexible, unplanned) with your savings, we will call this Total expenses. Subtract Total expenses from your Income and you are left with what is called Net Income. If you have more money coming in each month than going out, your Net Income will be a positive number. With that number you can estimate what your Net income will be in two months, two years or two decades! The accuracy of that estimate will be less over time, as your income and expenses change, so a monthly budget might be best for estimating up to a few years.

(Total Income) – (Total Expenses) = Net Income

With a positive Net income, you can imagine a future of taking family vacations, going to college, or getting a drift boat. This can make you feel more secure, optimistic, and motivated to reach those goals. Unfortunately, many Americans are finding that at the end of the month more money has gone out than has come in, leaving their budget with a negative Net income. This can happen for a number of reasons including paying a disproportionate amount of your monthly income for things like rent, unexpected expenses, loss of income, or more recently, increasing inflation can play a role. In our next post, we will explore how financial uncertainty can cause stress (impacting your overall health), and what you can do to manage it and take steps toward improving your financial wellness. 

AUTHOR: Brett Buesnel, AmeriCorps VISTA at Tillamook County Community Health Center

Other wellness questions? Email us at info@tillamookcountywellness.org. For more local health and wellness information, visit www.tillamookcountywellness.org or follow Tillamook County Wellness on Facebook and Instagram