Financial Budget: You’ve analyzed your previous expenses, entered them into spreadsheets, loaded all of your data into Quicken, and created a budget. So, what’s next? This is the most difficult part! You must actually stick to your budget and carry out your plans. It’s a lot easier to say than it is to do. Many times, 6 months or a year later, you will have forgotten about your budget and financial goals. How do you prevent something like this from happening to you?
Here’s how to do it. If you don’t want this to happen to you, make sure to follow some of the tips below.
1. Make a budget with attainable goals – Let’s say one of your budget objectives is to avoid eating out for lunch or dinner regularly. If you’re being completely honest with yourself, you might find this to be an unattainable goal. It’s sometimes nice to take a break and enjoy a relaxing and rewarding evening. To put it another way, don’t raise the bar too high. One of the surefire ways to ensure that your budget fails is to set lofty and unrealistic goals.
2. Budget for one-time expenses – Make sure you account for one-time expenses like holiday gifts, birthdays, vacations, weddings, car maintenance, and so on. These expenses don’t happen every month, and they’ll rip your budget to shreds. Make a calendar of these events and assign a monetary value to them. Put them in the month you expect them to happen so you can plan ahead of time how you’ll pay for them. Regular expenses are not the cause of your budget’s failure. If you don’t plan for them, these “gotchas” will wreak havoc on your budget.
3. Write down your budget plans – Spend some time writing down your budget plans. Making a mental note of your budget objectives is a surefire way to fail. Don’t expect your financial future to take care of itself just because you made a mental note to yourself. If you have your budget goals written down, you can review and remind yourself of them on a weekly and monthly basis.
4. Don’t give up if you’re having a bad month or week! – Assume you’ve been meeting your budget goals for the past three months. You didn’t meet your budget goals in the fourth month for whatever reason. Maybe you’ve given up on sticking to your budget! Don’t just throw your hands up in the air and admit defeat if this happens. Everyone has a bad day now and then. Your spending plan is a journey. There will be setbacks along the way, so keep in mind that everyone makes mistakes. This is connected to a story I enjoy about a legendary golfer named Walter Hagen. He told himself before each round of golf that he would have four or five bad shots. If he hit his ball into a bunker during a golf round, he would tell himself, “There’s one of my bad shots that I was expecting,” and then hit the ball out of the bunker and move on. It didn’t bother him in the least because he had anticipated some poor shots in his round.
5. Make adjustments to your budget over time – This is a big one! A personal budget can take months, if not years, to perfect. You probably had to guess at some of your figures when you first made your budget plans. They could have been disconnected from the realities of everyday life. You may have overestimated your monthly grocery or utility bills, for example. If this occurs, examine all of the underlying funds spent in this category to see if your initial estimate was too high. If that was the case, try to come up with a more precise figure and then stick to it. This type of adjustment is one of the most important aspects of sticking to your budget.
6. Review your budget once a month – this is where you’ll make any necessary adjustments. Make a point of reviewing your income and expenses on the first day of each new month and comparing them to your budget goals. You can adjust your spending habits by actively reviewing your finances and comparing them to your budget. This allows you to examine areas where your budget expectations were exceeded and make necessary adjustments to your spending habits or budget. The goal here is to keep your budget in mind. Putting a printout of my basic budget goals on the refrigerator has proven to be effective for me. That way, I’d be reminded of my budget goals sheet several times a day. I don’t always read it, but I notice it and it serves as a reminder that I need to stick to my budget. That is why the third point is so crucial.
7. Establish specific short-term objectives – Let’s say one of your budget objectives is to pay off all of your credit card debt in two years. If your credit card debt totals $20,000, you’ll be paying $10,000 per year. Divide that amount by three to get quarterly credit card bill reductions, in this case, $2,500 every three months. Isn’t this a more concrete budget goal to aim for now? I find that dividing intermediate and long-term goals into short-term tangible stepping stones allows me to feel more accomplished and increases my chances of success. We’ve arrived at number eight…
8. Reward yourself – Yes, you read that correctly! When you achieve some of your short-term objectives, reward yourself. Take some time to smell the roses along the way, since your financial budget is really a journey. Maintaining a budget should not be a burdensome or unpleasant experience. Not only should you take time to appreciate your financial achievements along the way, but you should also set aside money for fun activities. Just make sure your incentives don’t blow your budget!
9. Pay yourself first – I’m sure saving and investing a portion of your income is one of your budget goals. One of the most important things you can do to ensure your success is to do what the IRS does with your paycheck: immediately deduct it from your discretionary income. This way, the funds are set aside right away. Put the money into a savings or mutual fund account right away. Many mutual fund companies allow you to set up automatic payroll deductions. Despite your best efforts to save, the hectic demands of daily life can limit your ability to do so.
10. It’s all about your attitude – When most people think of a budget, they conjure up images of constraints and suffering. It’s almost like you’re on a diet. What happens with the majority of diets? They don’t appear to work for very long! To begin with, if your budget is too strict, too restrictive in terms of your spending, it will not work. However, you will need to cut back on your spending in some areas, which will necessitate a mental shift. When I’m feeling restricted and sorry for myself because I can’t buy something I want, I remind myself of the financial goals I set with my budget. I consider how happy I am when I achieve my objectives. Over time, you realize you don’t want to let yourself down by breaking your spending goals on a whim purchase. When the thought of an impulse purchase crosses my mind, I actually get more pleasure knowing that I am on track to meet my budget goals.
Your budget plans will be more likely to succeed if you follow these suggestions. Living on a budget is not as difficult as you might think if you follow a few simple steps. It can even be enjoyable and rewarding!