Creating and then maintain an effective budget is one of those things that the majority of us think is next to impossible. While maintaining a budget does take some effort and commitment, it is nowhere near impossible. When speaking with people, just like you, about their financial lives, we’ve realized that most people are focusing on the wrong details when it comes to creating and maintaining their budgets.
Our number one piece of advice that we think everyone needs to follow, is to create a budget that works for your life, your income, and your needs. Creating a budget that is either too difficult to follow or requires too much time, is only setting yourself up for failure.
If you have children to look after, a husband or wife to spend time with, a job to go to, and a dog to walk, don’t create a budget that requires a lot of time commitment. Instead, rely on automatic payments and transfers. If your income in less than you’d like but you’re still looking to make saving a priority, take it slow and steady, and don’t set unrealistic expectations for yourself. Whatever you think your issue or roadblock is, create a budget that works with it instead of against it.
To help you create the best possible budget for your unique financial needs here’s a list of a few other budget “don’ts” that you should avoid.
Budgeting Don’t No. 1: Don’t be too specific with your numbers right from the start, it may hinder your success.
Giving yourself spending guidelines is an integral part of any budget, but it’s important that you aren’t too specific about the numbers when you’re creating the first draft of your budget. Yes, one of the main points of a budget is to level out your spending, track your expenses, and make sure you’re staying on track to complete your goals. But, aside from your fixed expenses, like your mortgage, rent, or insurance, most of your other expenses will fluctuate month to month.
Creating very strict spending budgets for groceries, gas, and utilities could become a constant source of stress for you, especially when you aren’t able to meet those goals because of outside variables. This is why we can’t recommend enough that you set realistic goals so that when gas goes up in price or none of your regular groceries are on sale one week, you’ll still be able to fit everything into your budget.
Budgeting Don’t No. 2: Don’t be too general when you create your categories, it’ll be easier to forget how you’re actually spending your money.
While we think it’s a great idea for you to be lenient with yourself about numbers when you first start budgeting, we also think it’s important that you’re as specific as possible about categorizing your spending right from the start. General categories will make it a lot easier to “cheat” on your budget. What we mean by this is that you’ll be more tempted to hide unnecessary purchases in categories with titles like, food, car, and home. But when you create categories with more specific titles like groceries, eating out, gas, car maintenance, utilities, and home entertainment, you’ll be forced to face your spending head on.
Specific categories will allow you to see how you’re spending your hard earned money, figure out where you can cut back if you’re looking to save up for a specific expense, and determine if you need to reallocate some of your money to another category.
Budgeting Don’t No. 3: Don’t forget to create a budget that allows you to save
Generally speaking, the majority of people who start a budget are looking to save their money. You may be looking to save for a vacation, retirement, or to help pay off any debt you might have. Whatever your reason, a properly managed budget is, in fact, a great way to achieve your saving goals.
One issue that we see new budgeters come across, is that they forget to add in a savings category into their budget. You need to plan to save. Treat your savings account like any other monthly (or weekly) bill you need to pay. Set up automatic transfers to your savings account, this way you know you’re meeting your savings goal.
Budgeting Don’t No. 4: Don’t forget to make debt repayment a priority
Even if your number one reason for creating a budget is to save for an upcoming vacation, if you have consumer debt or credit card debt you should also make paying it off a priority. Debt can create a lot of financial issues and even prevent you from achieving your financial goals. This is why it’s a great idea to add debt repayment as one of your budget categories.
First and foremost, you should always make sure you’re making at least the minimum payments on your credit cards. But, if you’re really looking to make a serious change in the way you manage your money, allocate more than your credit card’s minimum payment toward repaying your debt.
Paying more than the minimum payment each month will allow you to get out of debt quicker and guarantee that you’re saving money on interest charges, something that we know everyone with credit card debt wants.
Maintain an effective budget means being realistic every step of the way. Are your goals realistic? Are you spending guidelines realistic? Is your debt repayment realistic but also challenging enough to get out of debt sooner? Do your categories make sense for your lifestyle? No matter how you create your budget just make sure that it fits into your life in a way that won’t be too overwhelming or too stressful.