Wednesday, January 21, 2015

How To: make and stick to a budget

I suck at sticking to a budget. Luckily this isn't a skill I've had to be great at so far in my life, but hopefully within the next few months that'll change. Whether you're like me and enjoying life with mom and dad paying most of your bills or you're a college student with a small monthly stipend or a new grad trying to figure out life on your own for the first time, being able to stick to a budget is a great life skill.

Last week I wrote a post about ways to build your savings account and mentioned one of the best ways to achieve that is by sticking to a budget. Today I wanted to share how I make and stick to my budget. Usually How To posts are written by people claiming to be experts or at least really really good at the thing they're teaching, but I'm not. This is more of a share and learn type post. I'll share what I'm currently doing and hopefully you'll leave me a comment with what you're currently doing. The idea of this post is to help everyone become better at this essential life skill.


Currently I make my monthly budget using 3 steps:
1. Realization - Spend a month keeping meticulous records of everything you spend. This will allow you to have the most accurate picture of how and when you're spending money. For me the easiest way to do this is to use my debt card to pay for everything and then using my online billing to look at my detailed statement at the end of the month. It's really an eye opening experience to see how all your small purchases you've probably forgotten about add up at the end.

2. Organization - Once you have a detailed list of your spending you'll need to divide your expenses into different categories. Some of these will probably include: rent, groceries, gas, utilities, entertainment. But you might also want to include categories for savings, donations, or small happys such as fresh flowers and funny cards to send to a friend who lives across the county. My budget is broken into: food, necessary shopping (shampoo, tooth paste, etc), splurge shopping (those new boots that I just have to have), donations, and savings account.

3. Prioritize - What is most important to you? These things are going to deserve a larger portion of your budget. Obviously there are going to have to be exceptions for set things like rent, insurance, and utilities. But if the one thing that brings you the most joy in life is happy hour with the girls from your office, you need to make sure to give enough in your budget to it. At the end of the day your budget has to be something you can stick to, and if you're miserable with life because your favorite things are gone you'll have trouble with that.

It's important to remember that you shouldn't place all your income into a budget. You need to leave a little extra for emergencies. This cushion is probably the most important part of your budget. Ideally you don't have to touch this and after a few months to a year you can move it into your savings or use it towards a fabulous vacation or similar splurge. I'm hoping to take 2 trips this year, one in April and one closer to my July birthday, in addition to adding the $5000 to my savings account. This extra cushion is where I'm hoping to be able to pay for my trips.

Once I've made my budget I find the easiest way for me to not over spend in areas is by using cash. I'll stop by the ATM and withdraw the amount that I've set aside; obviously this doesn't work for everything but I've found it's especially helpful for eating out. My debt card is only for online purchases (always try to go through Ebates to get the percentage back!) or over $40 shopping trips, and my credit card is only used for gas. Another trick that I've found to work well is delaying large purchases by at least 24 hours. I'm really bad about impulse online shopping; usually after waiting till the next day I suddenly don't want that must have item so much.

Okay so spill it. What are your tricks to sticking to a budget?

5 comments:

  1. This is so helpful! I admit lately I've had difficulty sticking to a budget and have even been taking money out of savings instead of putting money in. I really need to get it under control this year.

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  2. These are all great tips! I use the envelope system by Dave Ramsey to stay organized and to keep me on track. How is your budget working for you?

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  3. Some great advice here! I definitely need to get a budget together.

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  4. These are really smart, helpful tips! And I needed them lol

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  5. It's really beautiful work.Thanks for this kind of stuff.I mean I am totally impressed. Hope to see more updated work here. I have to say, it is very informative..

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