Budgeting is a learning process. We’ve said before that there is no such thing as the perfect budget. The truth is no two people will make the same budget even if they are living on the same income, in the same neighbourhood with the same number of dependants, nor should they.
Creating a budget is not about restricting your choices. In fact, it’s about making choices that will help you achieve your objectives. Do you want to go on a special vacation next year? That’s fine. Plan for it, find ways to save for it & you can make it happen. It may mean giving up something else you ‘want’. The key is your budget can help you get there.
So if budgeting is so useful, why do so many people fail at the attempt?
The truth is that sticking to a budget can be difficult at first. You may have tried budgeting before and given up part way through.
Here are some things you can do to be sure your budget is successful the second time around — or if you’re lucky the first time.
Allow for a fun category. If you don’t allow yourself some room to enjoy some leisure, or a few little extras, you are more than likely going to give up. There is no harm in going out to see a special movie or having lunch with your friends. Yes, if you are trying to pay off your debt or increase your savings you can’t do this every week. However you should budget a small and reasonable amount to allowing yourself some fun spending.
Have an emergency fund. Unexpected things happen. Having an emergency or rainy day fund will give your some breathing room to cover unexpected costs without blowing your budget. If you have to rely on your emergency fund, be sure to make room in your budget to replace those funds, over time, for the next emergency.
Include a miscellaneous category. This is a little different than your fun category. This is for necessities you may have forgotten to include in your budget. Even if you maintained a 30 day spending journal and carefully reviewed all of your old bills and statements, you may have missed something. A miscellaneous category can help with that. If you don’t need it, don’t spend it. Put the difference in a savings account for the time you may. At the end of the year if you haven’t used it, you’ve now got some bonus savings to allocate where you wish.
Don’t over-budget. While you should track all your expenses, you don’t need to record every last detail. A broad category for groceries is fine, you don’t need to plan out every item or trip to the grocery store. Just be honest about your categories. If you pick up some t-shirts at the grocery store that belongs in personal items or clothing, not groceries.
Avoid the temptation of credit. If you don’t have the ability to control your spending when you are out, leave the credit cards at home.
Don’t beat yourself up. Sometimes you are going to spend a little more than you planned. Don’t let that stop you. Figure out what happened, make changes if you need to and get back on track.
Keep your eye on the goal. As we said earlier budgeting is about making choices, not restricting your spending. You budget is there to help you learn to manage your money better so you can achieve your financial objectives. Try to remember those goals in the event you have to tell yourself no.
It’s worth repeating. “Budgeting is a learning process”. If you follow the steps to making a good budget, commit to learning from your mistakes and make adjustments along the way, you will be able to work your way out of your money problems.