Budgets and Money

Budget Checkup at Tax Time

Tax season is a perfect time to look at how much money is coming in and give the household budget a checkup. This six-step process could help you take control of your money.

Budget Checkup: Tax Time Is the Right Time

Every year, nearly 130 million households file their federal tax returns.¹ For many, the process involves digging through shoe boxes or manila folders full of receipts; gathering mortgage, retirement, and investment account statements; and relying on computer software to take advantage of every tax break the code permits.

It seems a shame not to make the most of all that effort.

Tax preparation may be the only time of year many households gather all their financial information in one place. That makes it a perfect time to take a critical look at how much money is coming in and where it's all going. In other words, give the household budget a checkup.

Six-Step Process

Budget Check Up

One method for doing a thorough budget checkup involves six steps.

  1. Create Some Categories.

    Start by dividing expenses into useful categories. Some possibilities: home, auto, food, household, debt, clothes, pets, entertainment, and charity. Don't forget savings and investments. It also may be helpful to create subcategories. Housing, for example, can be divided into mortgage, taxes, insurance, utilities, and maintenance.

  2. Follow the Money.

    Go through all the receipts and statements gathered to prepare taxes and get a better understanding of where the money went last year. Track everything. Be as specific as possible; and don't forget to account for the cost of a latte on the way to the office each day.

  3. Project Expenses Forward.

    Knowing how much was spent in each budget category can provide a useful template for projecting expenses moving forward. Go through category by category. Are expenses likely to rise in the coming year? If so, by how much? The results of this projection will form the basis of a budget for the coming year.

  4. Determine Expected Income.

    Add together all sources of income. Make sure to use net income.

  5. Do the Math.

    It's time for the moment of truth. Subtract projected expenses from expected income. If expenses exceed income, it may be necessary to consider changes. Prioritize categories and look to reduce those with the lowest importance until the budget is balanced.

  6. Stick to It.

    If it's not in the budget, don't spend it. If it's an emergency, make adjustments elsewhere.

Tax time can provide an excellent opportunity to give your household budget a thorough check up. And taking control of your money could enable you to put more of it to work pursuing your financial goals.

1. IRS, 2013

Tip: Cash Conscious

Cash purchases don't show up on monthly statements, making them more difficult to track. Consider keeping receipts for all cash purchases.

Fast Fact: Budgeting Apps

For smart phone users, an app may help you set and track your budget. The iTunes App Store and Google Play each list over 1,000 different budgeting apps.

Apple App Store and Google Play, surveyed on February 13, 2013.


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Protective Life refers to Protective Life Insurance Company (PLICO) and its affiliates, including Protective Life & Annuity Insurance Company (PLAICO). FMG Suite is not an affiliate of PLICO and is responsible for its own financial conditions and obligations.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2013 FMG Suite.

This article is for information and educational purposes only and does not necessarily represent the opinion of Protective Life. Protective Life did not assist in the preparation of this material. For information about Protective Life and its products and services, visit www.protective.com.