10 Tips to Make Sure Your Financial Budget
by Greg Quincy
You've analyzed your past expenses, put them into spreadsheets, loaded Quicken
with all of your data and come up with a budget. Now what? The tough part! You
actually have to stick to your budget and put your plans into action. This is
easier said than done. In many cases you will have forgotten about your budget
and your financial goals 6 months or a year down the road. How do you keep this
from happening to you?
Here's how. Make sure you follow some of these tips below so this doesn't happen
1. Create a budget with realistic targets - Let's say one of your budget goals
is to not eat out for lunch or dinner on a regular basis. If you are honest with
yourself you may find this to be an unrealistic goal. Sometimes it's a nice
break to eat out and have a relaxing rewarding evening. In other words, don't
set the bar too high. Drastic and unrealistic goals are one of the surefire ways
your budget will not succeed.
2. Budget for expenses that don't occur on a routine basis - Make sure you give
consideration to expenses that occur once a year, such as holiday presents,
birthdays, vacations, weddings, car maintenance costs, etc. These expenses don't
occur every month and they will bust your budget plans wide open. Make a list of
these events on a calendar and put a dollar figure to them. Place them in the
month they are expected to occur so you can plan in advance how you will pay for
them. The regular routine expenses are not the reason your budget will fail. It
is these "gotchas" that will wreck havoc on your budget if you don't plan for
3. Put your budget in writing - Take the time to write down your budget plans.
Making a mental note of your budget goals is a recipe for failure. Don't assume
that your financial future will take care of itself by making a simple mental
note to yourself. If you have your budget goals detailed in writing you can
review and remind yourself weekly and monthly of your financial goals.
4. If you have a bad month or week, don't give up! - Let's say you have been
reaching your budget goals for three months. In the fourth month, for whatever
reason, you didn't reach your budget goals. Maybe you even stopped trying to
stick to your budget! If this happens, don't just throw your hands up in the air
and admit to failure. Everyone falls off the wagon sometimes. Your budget is a
journey. There will be bumps in the road, so the key is to realize that everyone
makes mistakes. This relates to a story I like about a great old time golfer
named Walter Hagen. Before each round of golf, he told himself that he would
have 4 or 5 bad shots. During the golf round, if he hit his ball into a bunker,
he would tell himself, "There is one of my bad shots that I was expecting", hit
the ball out of the bunker and move on. It didn't phase him one bit because he
had knew there would be some bad shots in his round.
5. Adjust your budget over time - This one is a biggie! It can take months or
even years to fine tune a personal budget. When you initially made your budget
plans, you probably had to guess at some of your figures. They might not have
been in touch with the realities of every day life. For example, you may have
underestimated your monthly grocery or utility bills. If this happens, analyze
all of the underlying money that was spend in this category to see if your
initial estimate was unrealistic. If it was, try to come up with a more accurate
number and then to stick to that new figure. It is this type of adjustment that
is one of the keys to making sure you can stick to your budget.
6. Review your budget every month - This is where you will make any adjustments
that are needed. Set aside the first day of each new month to review your income
and expenditures and match them to your budget goals. By actively reviewing your
finances and comparing it to your budget, you can adjust your spending habits.
This gives you a chance to analyze areas that exceeded your budget expectations
and make the adjustments in your spending habits or your budget. The goal here
is to not forget about your budget. One tip that has worked for me is to put a
printout of my basic budget goals on the refrigerator. That way every day,
several times a day, I would notice my budget goals sheet. I may not read it
every time, but I notice it and it reminds me that I need to stick to my budget.
That is why tip number 3 is so important.
7. Set specific short-term goals - Let's say one of your budget goals is to have
all of your credit card bills paid off in two years. If your credit card
balances total $20,000 that would be $10,000 a year. Divide that number further
into quarterly reductions in your credit card bills, in this case $2,500 every 3
months. Now, this is a more tangible budget goal to shoot for isn't it? I find
that when I divide intermediate and long term goals into short-term tangible
stepping stones, I am able to feel a greater sense of accomplishment and am more
likely to succeed. This brings us to number eight.
8. Reward yourself - That's right! Treat yourself when you reach your some of
your short-term goals. Since your financial budget is really a journey, take
some time to smell the roses on your way. Sticking to your budget should not be
a restrictive, unpleasant experience. Not only should you take the time to enjoy
your financial accomplishments along the way, but use part of your budget for
fun things that you enjoy. Just make sure your rewards don't end up breaking
9. Pay yourself first - I'm sure that one of your budget goals is to save and
invest a portion of your income. One of the keys to make sure you succeed at
this is to do what the IRS does with your paycheck, take it out of your
discretionary income immediately. This way, the money is saved away right off
the bat. Move the money immediately into a savings or mutual fund account. Many
mutual fund companies can setup automatic deductions from your paycheck. Despite
your best intentions to save, the hectic, daily demands of life can reduce the
amount you are able to save.
10. Attitude is everything - When most people think of a budget, they picture
restrictions and pain. Almost like a diet. You know what happens with most
diets? They don't seem work for long! First, if your budget is too strict, too
restrictive on your spending, it won't work either. However, you will need to
limit your spending in some areas and this will take some adjustment in your
attitude. I found that when I am feeling limited and sorry for myself when I
can't purchase something that I want, I remember my financial goals I set with
my budget. I think about the satisfaction I feel when I reach those goals. Over
time, you find that you don't want to disappoint yourself by breaking your
spending goals on a spur of the moment purchase. Now, I actually get more
pleasure knowing that I am reaching my budget goals when the thought of an
impulse purchase crosses my mind.
If you follow these tips, your budget plans are more likely to be a great
success. By taking some simple steps you will find that living within a budget
is not as tough as you imagined. It can actually be fun and rewarding!
Greg Quincy is the publisher of the website
offering his insights and personal finance budget tips that he has gained from
working in the financial industry and the economic challenges of raising a