Ready or Not…It’s Time to Budget

Budget

If there is one thing that falls at the top of most of our procrastination list, budgeting is usually one of them.  It is a pain in the butt to retrace everything that was purchased on any given day, especially when you add in different bank accounts, checks, credit cards, and cash.  But the ugly truth is that it is a must in order to make a realistic plan about your financial future.  Without a blueprint you are really just walking in the dark hoping you end up where you want to be.  The question becomes how to end up with a budget that works as a blueprint that you can both develop and actually use to track and guide your financial decisions.  Here are a couple of tips you can use to make a budget that bridges the gap from where you are to where you want to be.

1. Start with where you are:  Looking back on where you spend is the best way to start on the yellow brick road.  Of course there are some great programs to categorize your expenses and some banks even provide a spending detail.  By looking at a longer range of dates, optimally a year, you are able to catch some expenses that pop up sporadically and start to identify what your spending habits are.  How you spend money is the best basis for you building a budget as you can id what are mandatory and optional expenses.  Start your budget with the income and take away the expenses that are a must and prioritize the other expenses.

2. Be honest about your spending habits: By starting a budget you’ve taken a big first step, so don’t stunt it by not wanting to face the truth.  If you spend $100 at the grocery store every week, putting $200 in your weekly budget is a recipe for disaster.  Budgeting is really a balancing act between what you have (income), what you need (mandatory expenses) and what you want.  If you don’t check a look at what you are doing you can’t make the adjustments to get on the right track.

3. Choose a reminder of why budgeting is important: Every budget is going to be different.  It may be to buy a new house or car, save for a rainy day or retirement or perhaps it is just to help adjust your spending to match your income.  Whatever your motivation saturate your senses with it.  Find a picture to make it visual, repeat it to your self out loud.  This may seem silly but the reminder will be just what the doctor ordered when you’re tempted to jump ship and buy something that makes you feel good (at least for a little while).

4. Stay away from temptation: Personally I am a strange balance of cheap and expensive.  I only really buy things when they are on sale but boy I can go crazy when a good sale hits.  My budget, unfortunately, does not have a lot of spending leeway so to stay on track I just avoid the whole situation.  If you have done a review of how you spend then you probably know even expenses that start small like coffee at Starbuck’s can add up over a days and weeks.  If you can’t afford it then why play yourself?

5. Choose a regular time frame to track your expenses: This is where it is easiest to fall off the budget wagon.  It can be a pain and it is only worst the more time you put off each review.  Ideally on a daily basis you are able to cut down the time of the review because you actually remember what you spent.  There are a ton of programs and apps for budgeting but I also like some basic techniques like taking a picture of receipts so when you go back you have a record of what you spend.  Doing the bookkeeping regularly also helps your budget be more interactive to get you quickly back on track instead of just a chronicle of all the ways you failed to keep your budget throughout the month.

6. KISS.  Keep it simple stupid as my mom always says.  Choosing methods with all the bells and whistles can complicate the process and really be discouraging.  I like automating as many of the most important tasks as I can, such as an automatic transfer to savings or paying mandatory bills.  This takes some of the leg work out of the process every month.  If you are short on time just really focus on what making sure you spend less than you make and save the rest and build from there.

Photo Courtesy of Flickr

http://www.flickr.com/photos/68751915@N05/6869762317/

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  1. […] If there is one thing that falls at the top of most of our procrastination list, budgeting is usually one of them. It is a pain in the butt to retrace everything that was purchased on any given day, especially when you add in different bank accounts, checks, credit cards, and cash. But the ugly truth is that it is a must in order to make a realistic plan about your financial future. Without a blueprint you are really just walking in the dark hoping you end up where you want to be. The question becomes how to end up with a budget that works as a blueprint that you can both develop and actually use to track and guide your financial decisions. Here are a couple of tips you can use to make a budget that bridges the gap from where you are to where you want to be. 1. Start with where you are: Looking back on where you spend is the best way to start on the yellow brick road. Of course there are some great programs to categorize your expenses and some banks even provide a spendi  […]

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