Realistic and helpful budget ideas can be harder than it looks. Here are a few ideas to start immediately. Planning now will minimize the chance of failure later.
- Call it a Spending Plan. Planners often use descriptions such as a “savings and spending plan” or “cash-flow management.” This is because the term “budget” can feel very limiting or restricting, while a “savings and spending plan” focuses on being in control of your spending and making informed choices for directing dollars to where you most want them to go.
- Everyone benefits from a budgets. Planners report putting even wealthy clients on spending plans because they, too, frequently struggle to save and control spending.
- Under spend your income. Building financial success and security is based on the premise of spending less than you earn. That’s difficult to do if you don’t know what you’re earning and on what you’re spending your money. That’s the role of a spending plan, to help you see where your money is coming from and where it’s going.
- Start saving. Trying to create a useful budget without a comprehensive financial plan is like working a trapeze without a net. Financial professionals find that clients are most motivated to stick to a budget after they develop a financial plan based on their financial goals and values.
- Select a usable system. Planners report that some clients work best with a detailed spending plan that tracks every penny. Other clients seem to do better with a “top-down” approach. In this approach, they first set aside funds for their savings goals and major expenditures such as a home, insurance, and groceries, and let the little stuff fall where it may.
- Priorities get paid first! Regardless of what approach you take to budgeting, a key is to be sure priorities are paid first. That reduces what you can potentially fritter away on less consequential spending.
- Follow your spending. Even if you prefer a more general “top down” approach to budgeting, it’s can be helpful to track all your spending closely for at least several months just to get a feel where your dollars are going.
- Manager your cash. Financial Counselors note the largest expense category in a client’s budget is called “miscellaneous.” Because of this they recommend meticulously tracking cash expenditures for a month or two.
- Set some short-term goals. Planners find that budgeting for a short-term goal is good practice and can help motivate clients to work toward more expensive long-term goals.
- Develop sub-accounts. Planners often find it useful for clients to establish savings sub-accounts such as the vacation account, the car account, the education account and the retirement account. With a single large account, it’s far easier to blow money.
- Automate spending. A simple trick is to have as many of your fixed expenses, such as mortgage and car loans, paid automatically from your checking account.
- Review the plan. No matter how detailed a spending plan, there is a simple way to gauge whether it is working. Maker sure to increase savings and decrease debt at a good pace. In short, make sure you building net worth.
Use Budget Investigator to develop a great document to further your financial future.