One of the biggest challenges in money management is sticking to a budget. To many, a budget represents deprivation and disappointment. It feels as though you are denying yourself. On top of that, if you make grand plans with your budget, you might find it practically impossible to live up to.
If you are struggling with your budget, here are a few simple tips that can help you create a budget that actually works for you.
1. Think of your budget as a spending plan
It’s amazing how big a role psychology plays in finances. To many, “budget” is a dirty word, conjuring up images of restrictions on spending, and not truly being in control of where your money goes. Instead, subtly adjust your mindset to think of it as a spending plan. It sounds more proactive – as though you are in charge.
Think of yourself as the director of your financial resources, and your spending plan as tool to help you accomplish your goals. You’ll feel more positive about the whole experience of “giving your dollars jobs to do,” and be more likely to stick to it.
2. Plan your budget to fit to your priorities
Really think about what’s important to you, and what you want your money to accomplish. Do you want to pay down debt? Save for retirement? Give to charity? Pay for your child’s extracurricular activities? Also, think about your regular spending on things like groceries, bills, insurance, and other obligations. Think about which items are most important in your budget.
Also, think about what’s most important to you, now and in the future. I want a solid retirement, so if it’s a choice between contributing to the IRA or buying a new bed, I’m contributing to the IRA. I like eating out much more than I care about whether or not I have a new outfit or a haircut. As a result, if I have to make a choice between going out for sushi and buying a new outfit, I’m enjoying the latest specialty roll at Japanese restaurant in town.
Go through and list your monthly expenditures. Order them from most important to least important. Make a budget based on paying for the most important items first, and dropping the items at the bottom of the list. This is especially important if you have variable income. You’ll feel better on tighter months because the expenses being axed aren’t those that are most important to you.
3. Set reasonable goals for your money
While it would be nice to say that you’re going to put $1,500 a month toward debt reduction, that’s not always practical. After a couple of months of barely making it, or running into problems of unexpected expenses, your resolve wavers.
The same thing happens when you set unrealistic milestones for yourself. Honestly evaluate your situation, and what is actually doable. Then, set reasonable goals for your money, and for your financial future. Yes, you need to push yourself to stretch a little bit. It helps you make positive changes. But stretching a bit isn’t the same thing as setting yourself up for failure.
Consider ways that you can move slightly out of your comfort zone as you improve your financial situation, and set goals that are attainable with a little extra work. You’ll feel a real sense of accomplishment, and be encouraged to stick with your budget/spending pan because you can see how it really works and benefits your situation.
4. Don’t be afraid to make tweaks to your budget
Sometimes, what we think is reasonable turns out not to be. Don’t be afraid to make tweaks to your spending plan when called for. Just because you can’t seem to set aside $1,000 a month for your emergency fund doesn’t mean you need to scrap the whole budget. Instead, tweak your plan so that you are putting in $800 instead, and still if that still encourages you to stretch without completely breaking your spirit.
There are plenty of other small tweaks you can make as well. If you discover that you are eating out more, and going to the movies less, adjust your budget to reflect your preferences. It’s okay to move things around a little.
With a little planning, and with the right mindset, it’s possible to make a budget that works for you.
This is a guest post by Miranda Marquit, a professional freelance writer who specializes in personal finance topics and runs PlantingMoneySeeds.com. She lives in Logan, Utah.
Image credit: anaken2012