Budget Check Up: Tax Time Is the Right Time

Each year, millions of households gather their financial documents to file federal tax returns. While it may seem like a tedious task, this process offers a valuable opportunity to take a closer look at your financial situation and ensure your household budget is on track.

Tax season is often the only time people have all their financial information in one place, making it an ideal moment to evaluate income, spending, and saving habits. Here’s a simple six-step process to give your budget a thorough checkup:

1. Create Expense Categories

Divide expenses into practical categories like housing, transportation, food, savings, debt, and entertainment. Subcategories, such as breaking housing into mortgage, utilities, and maintenance, can help provide a clearer picture.

2. Track Last Year’s Spending

Review the receipts and statements you’ve gathered for taxes to understand where your money went. Track everything—no detail is too small—to get an accurate overview of your spending habits.

3. Project Future Expenses

Use last year’s spending as a guide to predict expenses for the upcoming year. Consider any changes, like rising costs or new commitments, and adjust each category as needed to create a realistic projection.

4. Calculate Expected Income

Add up all sources of net income to determine how much money you’ll have to work with for the year ahead.

5. Compare Income and Expenses

Subtract your projected expenses from your expected income. If expenses exceed income, review your categories to identify areas for cuts. Prioritize needs over wants and adjust until your budget is balanced.

6. Commit to Your Budget

Stick to the spending plan you’ve created. Avoid unplanned expenses, and if an emergency arises, make adjustments in other areas to stay within your limits.

Tax season doesn’t have to be just about filing returns—it’s also a perfect time to take control of your finances. By reviewing and refining your household budget, you can create a stronger foundation for achieving your financial goals.