Tips on Planning a Budget and Sticking to It
Financial security is not something that happens overnight. While it can eventually become a simple and straightforward process, it takes time and energy to determine how to get there. Maintaining your finances and peace-of-mind will come more easily once you know the correct steps to creating a budget. This article will help you along the way by first allowing you to determine what you have and what you need financially. You can then be more realistic about your spending and eventually rearrange the way you spend, so that you will be able to save, save, save! You will also learn ways to take control of your billing schedule so that you don't skimp on financial goals, and learn how to maintain your budget, by not giving up. Creating a budget is the first step in taking control of, and benefiting from, your financial circumstances, regardless of your situation!
1) Determine What You Have and What You Need Financially
Congratulations! By reading this, you're taking the first step to creating a budget. To get started, determine your monthly income and monthly expenses. Pull out your checkbook and your bank statements to see what you've spent each month, or use a budget planning worksheet. Many worksheets can be found online for free, and while they vary from website to website, researching them is half the task of finding an approach that works best for your individual situation. When determining what you have and calculating your monthly income, make sure you look at your earnings after taxes or your net earnings, so that you are working from a realistic balance. Once you've figured out what you're making and spending on a regular basis you will be able to see how much money you have available for miscellaneous expenses and how much you can set aside for your savings.
2) Be Realistic About Your Spending.
Track what you spend for two to four weeks to determine accurate amounts for your budget. Do this by writing down everything you buy and how much it costs. Review this list and determine from it what you consider absolutely essential. Use this as your guide to what you have to spend. Restrict yourself to spending only on necessities as much as possible, but be realistic as well. Planning a budget is not a fantasy exercise. It must connect to real spending patterns, so be honest with yourself about how you spend!
3) Rearrange the Way You Spend.
Once you've determined how much you make and what your expenses are, look at how you spend your money. Assess your needs versus your wants and take care of the need portion of your budget before you address the wants. This may seem difficult at first, but it's merely a matter of setting aside a specific amount of cash each month for the things you want, and not going over that limit by dipping into credit or money you have set aside for bills and necessary payments such as mortgages or student loans.4) Save, Save, Save!
Now that you've figured out what you spend, you can see the potential to save. In addition to setting aside some flexible spending money that will cover your wants, you should be even more careful to set aside money for your savings. Pay yourself first--set aside money for savings at the beginning of each month, or as soon as you get your paycheck. Even if the amount you save is very small, as little as $20, it is important to get in the habit of doing this because your savings is your most important investment. Once your debt and spending are on track, you can then increase the amount you put in savings each month. No matter what, saving should always be a priority, even in the very beginning.
5) Take Control of Your Billing Schedule.
You don't have to pay your bills the day they arrive, but do pay them by the due date--late fees, like high interest fees, are a waste of your money. Many people will rush to get a bill out of their hands and back to the creditor to assure that they've taken responsibility for it, but often times this practice can be the irresponsible impulse because it can lead to overdrawn accounts if your payday and bill payments aren't aligned for coverage. Use a calendar to track when each of your bills are due and track this against what is deposited into your account each month. If you pay bills online, you can have the money deducted from your account at regularly scheduled times so that you only have to figure this schedule out once! If you want to be even more pro-active in creating this schedule you can call your creditors and take scheduling into your own hands. Many creditors will take the steps to rearrange the dates that your bills are due to accommodate what works best for you. 6) Don't Skimp on Financial Goals.
Give yourself a time-frame for reaching your longer term financial goals, and make these goals a part of your budget. Like your savings, these should be made a priority in your budget, but also determined realistically. If at first you can only set aside $20 for financial goals each month, do it. This will at least get you into the habit of taking these bigger, longer term purchases into consideration so that you don't keep putting them off by indulging in wasteful spending of what might seem like "extra" money at the time.
7) Maintain Your Budget.
It may seem simple, but this can be the hardest part. Everyone gets excited about being on a new track, but even ensuring your financial future can get old! Planning a budget can be considered the easy part; it's sticking with the goals you set for yourself that can be tough. Find a system that works for you to maintain your budget. Try setting aside one day at the end of each month to check yourself. Compare what you actually spent to what you estimated for your budget. If you are consistently off each month, you'll have to make some changes to rework your budget (see point 8 below). Once you're confident that your budget is realistic, the best way to maintain it is to set consequences and rewards for yourself. If you over-spend one month, don't allow yourself as much spending money the next month. Reward yourself if you save more than your target amount, perhaps by treating yourself to something small that you wouldn't normally buy. Need ideas? Treat yourself to a cup of coffee that you'd otherwise make at home; buy that new CD that you've been waiting to hear; even treat yourself to a night out with friends. By setting up these consequences and rewards you give yourself a reason to stay on track when tempted to buy something that isn't in your budget, and something to look forward to if you are successful in saving! 8) Don't Give Up!
Realize that the goals you initially set for yourself aren't always going to work the first time around. Be flexible--move things around to better fit your budget/schedule as you actually put it into practice. You only cheat yourself when you attempt to fit your life into a financial plan that really isn't fit for your life! Be positive--Getting discouraged can lead to a "what's the point attitude," which will only result in more spending and more debt! You can make adjustments to your budget along the way--just do whatever's necessary to stay on track.
Applying all these tips at once may seem overwhelming at first, but do what you can initially and add to your efforts along the way! You'll notice substantial improvements in your finances. |
