One reason a lot of people never create a budget for themselves — and therefore live paycheck-to-paycheck without ever improving their financial futures — is that they look at budgeting from a perspective that’s all wrong.
Many tasks in life relating to money are simply a check mark. Find a new car insurance provider: Check. Replace all light bulbs with more efficient LED ones: Check. Switch to a PerkStreet Financial cash back debit card: Check.
Then there are financial tasks that require attention every week or every month. Pick up the groceries. Check. Mail deposits to PerkStreet. Check. Pay the electric bill. Check.
Starting a budget is in the first group. Maintaining a budget is all about the second.
Your Money is NOT a Surprise
Contrary to the way it may feel, your money is not a surprise. Your income is probably fairly stable and your expenses are about the same each month. There are variations, which we’ll discuss here, but they aren’t as dramatic as they feel. If you’re constantly broke waiting for your next paycheck, the first thing you need to do is stop letting that happen by planning better. This means being better about creating the regular check boxes for things like paying bills. Whether you’re a pencil-and-paper kind of budgeter, a calendar-based budgeter or the kind of budgeter who would rather use high-tech software, you need to set a budget and keep tabs on it.
Both Your Income and Expenditures Will Change
Is your birthday next month? Well then, your monthly income is about to change, if only next month. Why? Because someone is probably going to give you at least $5 to celebrate. You might not want to consider birthday money part of your income, and that’s okay, but the truth is that your income does vary slightly based on things like this. If you’re the kind of person who boosts your income by taking on side jobs or even having a one-time yard sale, your income probably varies even more dramatically. Plus, if you’re an average person, your expenses change WAY more frequently than your income. Budgeting successfully means planning what you’ll take in each month and making sure it’s less than what you’ll spend — and making sure you’re prepared for those numbers to change.
Start with Needs and then Budget Wants
When I was a boy, my father used to tell me I needed to understand the difference between “wants” and “needs.” What he was really teaching me was how to think about my money (as well as my time, another thing that can benefit from solid budgeting). If you begin by budgeting in all your wants, you’ll be left with a lot of necessities you can’t pay for. If you budget in your needs first — things like rent, food, utility bills, paying down debt and saving — you’ll know exactly how much money you have for all the fun things you want. This is probably the single best piece of advice for prioritizing your spending, so starting with needs is really never a bad idea when building a budget or re-working the one you already have.
Create a Budget You’re Comfortable With (But Not Too Comfortable)
Building a budget and maintaining it is a personal activity; don’t be afraid to make it something you’re personally comfortable with. For some people, budgeting simply means planning for regular expenses. For others, budgeting is about tracking every penny in and out. No matter who you are, you can create a budget that works for you and helps you hit savings goals, reduce spending and increase income. You simply need to understand that it’s okay to make the kind of budget you’re comfortable with rather than trying to immediately fit yourself to an ideal budget. The trick is not taking it too easy on yourself; the danger is letting your budget become so lax that you quit budgeting altogether. Push yourself. Hold yourself accountable. Relish in your successes and take it seriously when you fail.
Review Your Budget Regularly
After you’ve created your monthly budget and set a plan for your spending, don’t be afraid to check back and see how you’re doing. Looking more closely at your money each month might feel uncomfortable, but you’re really only being honest with yourself by doing it. If some aspect of your budget was underestimated or overestimated, change it! Your budget is about your spending which means it’s really about you personally. Don’t sweat your inability to hit every goal. Instead, make sure budgeting is a learning experience each month and change things here and there to make sure you’re being fair to yourself. Whatever you do after you create a budget, don’t stop budgeting!
What’s your biggest challenge in maintaining your budget? Let us know in the comments so we can get you some quality advice!
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