Creating a budget is one of the best things you can do in regards to your finances. By creating and sticking with a budget, you will know how much money you have to work with, and where it’s all going.
But here’s the secret to making a budget work. You’ve got to create a budget that you can live with. It has to be realistic.
10 Tips For Creating a Realistic Budget
1. Keep track of all incoming money.
Make a list of all regular sources of income. Write down the net income you make from each source and add them up to know exactly what you are able to work with.
2. Keep track of all outgoing expenses.
This can be time consuming and can take awhile to get used to. However, it is absolutely essential when it comes to your budgeting. In order to figure out a budget that works for you, you must know the details of every area you are spending in. You must make sure you don’t miss anything when you budget.
3. Make a list of your short-term financial goals.
Decide what they are and how important your short-term goals are to you. Perhaps you wish to eventually spend $50 less per month on entertainment. Give yourself a goal of changing your spending within a certain time frame, perhaps a few months down the road. For example, I wanted to trim my grocery budget by $75 over the next 3 months. One of the ways I’m doing that, is by giving up soda.
4. Make a list of your long-term financial goals.
When you think about your future, what do you envision? Are you saving up to buy a house? Would you like to pay for your children’s college education, and be able to retire comfortably? Think about the distant future and plan accordingly.
5. Make a list of non-essential wishes.
When you decide where money should be going, think about the things that you don’t necessarily need, but definitely want. Things like coffee, movies and jewelry may fall into this category. You could also consider things like hobbies, travel, and home decor.
6. Decide what you can live without.
Is your money slipping away in every direction unnecessarily? Maybe it is time to cut out that daily specialty coffee, or the frequent meals eaten at restaurants. You may decide it’s time to dump cable or visit the library instead of buying books and movies. .
7. Decide what expenses you can save on.
There are always ways to save on what you need. Maybe you can make meals at home instead of stopping at the drive-thru. Perhaps you can shop for some of your clothing at a thrift store or trade outfits with friends, instead of spending large amounts of money at the mall.
8. Record every single thing.
You may not think that pack of gum or candy bar is going to destroy your bank account, but that assumption could be wrong. The little things add up, and every single cent should be accounted for to give you a better handle on where the money seems to be disappearing to.
9. Don’t rely on extra income.
When you create your budget, don’t be tempted to include things like tax refunds or Christmas bonuses. Consider those extra money, and save or invest them instead of relying on them as part of your regular budget.
10. Review your budget monthly.
Times change, as do life situations. Maybe the cost of electricity has gone up substantially, or you have an extra monthly expense for a kid’s activity. Reviewing your budget monthly will allow you to be constantly fine-tuning your plan, and keeping track of your finances.
Creating a realistic budget is time-consuming in the beginning, but worth every moment of effort you put into it. Make a simple and workable plan and you will never regret being in control of your finances. Instead, you will be rewarded with a stable plan and a successful future.