A Vital Financial Tool: Your Detailed Budget

Whether you need to do more with less, create a financial plan or calculate the cost of your dream retirement, there is one tool that can help. Some might say it is the cornerstone of financial security: a detailed budget.

Tracking Essential and Discretionary Expenses
To reach any financial goal, you need to understand how much money you have, how much you absolutely need, and how much could be set aside for the long term.

Consider retirement. Before you retire, you need your monthly income to go as far as it can to cover expenses and build retirement savings. You also need to estimate what retirement will cost so you can be sure your savings are on track. And when it’s time to transition into retirement, you want to know, with certainty, that you have enough to cover your essential expenses for as long as you live.

It all comes down to your detailed monthly budget. Specifically, it means deciding what is essential (must have) and discretionary (nice to have).

The following are the core categories that comprise a monthly budget. Start by estimating your monthly expenses in each category and divide the amounts into “essential” and “discretionary.” Calculate your pre-retirement budget, to find where you can save more, and follow the same process to identify what would be essential and discretionary expenses in your ideal retirement.

Housing
Include all mortgages and housing expenses including repairs, trash pick-up, furniture, association dues and real estate tax.

Utilities
Include electricity; gas/oil for heating; communication including phone, cell, internet and cable; other expenses including water and sewer.

Transportation
Include auto loans or leases, gasoline, car maintenance, licensing, tolls/taxes and parking.

Insurance
Include homeowners, automotive, health insurance as well as deductibles and co-insurance, life insurance, and other insurance including umbrella, disability, long-term care, dental and vision coverage.

Food and Entertainment
Include groceries, dining out, travel and other entertainment such as shows, hobbies and related expenses.

Other Loans and Legal Obligations
Include credit cards, personal loans and other payments including alimony, child support and judgments.

Miscellaneous Expenses
Include fees and dues such as health club/spa and education, grooming expenses such as hair and makeup, clothing and other expenses.

Contributions/Gifts
Include charitable gifts to church/synagogue/charity, holidays/birthday celebrations and gifts, other gifting and contributions.

Your detailed budget is the starting point for determining your next steps toward financial security. Contact your financial representative for guidance in creating your budget and using it as the basis for your own personalized financial security plan.

Depending on the products and/or services being recommended or considered, refer to the appropriate disclosure brochure for important information on the Northwestern Mutual Wealth Management Company, its services, fees and conflicts of interest before investing or engaging in financial planning services. To obtain a copy of one or more of these brochures, contact your representative.

Northwestern Mutual is the fleet name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM), and its subsidiaries. Northwestern Mutual Financial Network is the marketing name for the sales and distribution arm of Northwestern Mutual. Thomas P Carrigan is a Representative of Northwestern Mutual Wealth Management Company®, Milwaukee, WI (WMC), a wholly-owned company of NM and limited purpose federal savings bank. WMC is not a broker-dealer or insurance company. All WMC products and services are offered only by properly credentialed Representatives who operate from agency offices of WMC. Representative is an Insurance Agent of NM (life insurance, annuities and disability income insurance), and Northwestern Long Term Care Insurance Company (NLTC), a subsidiary of NM (long-term care insurance), and a Registered Representative of Northwestern Mutual Investment Services, LLC (NMIS), 5251 W 116th Pl Ste 300, Leawood, KS 66211, 913-362-5000, a wholly-owned company of NM, registered investment adviser, broker-dealer and member FINRA (www.finra.org) and SIPC (www.sipc.org). Representative may also be an Investment Adviser Representative of NMIS. NM and the RPS Financial Group are not broker-dealers, registered investment advisers or federal savings banks. There may be instances when this agent represents insurance companies in addition to NM or its affiliates.

Investment products are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by, NMWMC or its affiliates and are subject to investment risks, including possible loss of the principal amount invested.

The products and services referenced are offered and sold only by appropriately appointed and licensed entities and Network Representatives. Network Representatives and their staff might not represent all entities shown or provide all the services discussed on this Web site. Not all products and services are available in all states.

Thomas P Carrigan is primarily licensed in Kansas and may be licensed in other states.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.