How to Budget Successfully

How to Budget Successfully

Deciding that you need to create a budget is one thing. Actually creating and executing it is another. This is something that many people know and understand. Some go ahead and create a budget, including financial goals that are unrealistic. But if you want to budget successfully, you should consider a multi-step strategy instead of making common budgeting mistakes or budgeting excuses. If you have tried budgeting before and failed, try incorporating these steps next time. 

Before Budgeting

People fail for many reasons. One of them is having little faith in budgets and not seeing how they can help you improve your financial situation. You may feel like you don’t earn enough to budget. So before you start budgeting, establish your goals. What do you wish to accomplish with the budget? It could be paying off debt, saving for a home or becoming financially secure.

  • Write down four goals that are achievable in five to ten years. Examples include starting a family, home ownership, etc.
  • Write down financial goals achievable in one year such as paying off debt, getting a new job or creating an emergency fund. 
  • Write down goals achievable in a month such as giving up credit cards.

Create the Budget

Now that you know what you hope to accomplish with your budget, you can sit down and create it. Having clear guidelines and goals makes it easier for you to make necessary sacrifices. Write down your income and expenses then try to balance the numbers. This is the easiest part. Be sure to include the money needed to achieve your goals. 

Track the Budget

Creating a budget is not hard—following it is! This is where many people give up and fail. Recording your daily transactions and then subtracting them from the account isn’t easy. Not to mention you have to enter everything in its right category. You may transfer money from one category to another. The most important thing is to ensure that expenses never exceed the income. 

Budgeting can be done with a pen and paper, computer software or the envelope system. 

Evaluate Your Budget

After your first month of following the budget, you should evaluate it. This is a key step if you want it to work. It’s recommended that you come back and assess your budget every month, at least for the first six or so months. See if there are any weaknesses. Adjust where necessary. You can then start cutting back spending so you can have more money for your goals.

Set Goals for the Budget

If you attain your goals, set new ones. To make things interesting, some of the new goals should include rewards for attaining the already-set goals. This can be really motivating. For instance, a great meal out can be the reward for eating home cooked meals for a month. 

Cut Back Spending

Every year, come back to the budget and see if there’s an expense you can cut. Shop around for new car insurance, internet, etc. You may get a better deal.

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