Putting pen to paper and creating a budget is only the first step in taking control of your finances. The inability to follow the budget you created will result in frustration and discouragement. While spending can easily be tracked through apps, if you have not established your financial priorities, it will not be the guide that leads to financial freedom.
A budget is more than balancing the checkbook or ensuring you have enough in the account to cover weekly or monthly bills. It is more than an accounting of what you spend and where you spend. A sound budget is a tool which points you in the direction of your choice, rather than reactionary spending that is controlled by impulses.
Here are 10 steps to help you create and follow a budget that will serve as your financial roadmap.
- Dream a little and set personal goals. Without a long term vision to keep you focused, it’s just money, and money in and of itself is not a powerful motivator. It’s what the money represents and the life you can achieve with the funds you have, that will motivate you to action. When your life is just about keeping your head above water and collectors from calling, enthusiasm turns to drudgery. Allow yourself to dream about what you want your future to be, and then write it down. Gather images that help you visualize goals and place a dollar value on your dream so you have a measurable objective to work on.
- Create a written budget that can be tracked and measured. Any long term goal takes time to achieve. Olympic athletes don’t win first place but running a few laps around the track when they feel like it. They practice their sport every day, with greater intensity than the rest of us, whether they feel like it or not. It’s a choice. Financial success requires discipline and sound financial decisions over time. A successful budget must have measurable goals broken down into realistic daily or weekly routines.
- Make it simple. Budgets do not need to be sophisticated to be successful. Create basic categories based on current spending. Review expenses over the past 30 to 90 days to get an idea of where to start. Begin with an educated guess and update the budget over the coming weeks with more accurate figures as spending patterns are recognized and tracked. Once you have a clear view of where you are, cut back a little in each category to make room for savings, retirement, debt reduction, or other longer term goals. Consider setting up different accounts with different purposes, without over-complicating your finances.
- Review, Review, Review. A budget will always be a work in progress because financial needs are constantly changing. Prices of goods fluctuate, work schedules change, and spending habits adjust as your life moves forward. Each week, see where you stand. Cut out discretionary expenses when things are tight and add to savings when you have more than expected.
- Make it automatic. One way to ensure follow-through with your goals is automation. Auto deposit checks, use bill pay and drafts into a savings or retirement accounts. Set up payments based on the anticipated budget so payments are automatically sent when the bills are due. This strategy will reduce bank charges and late fees, and can increase savings without significant sacrifices to your lifestyle. If a paycheck is smaller than anticipated or an unexpected expense comes up, you can generally adjust the bill pay account within a day of the bill being paid. If you need to adjust a payment, consider grace periods and late fees when deciding what can wait.
- Build flexibility into the budget. Don’t allocate every penny earned to bills or savings. This practice can leave you short of funds before the next paycheck and may lead to resentment. It can be disheartening when you put money in savings and then have to pull it right back out because you miscalculated your needs. Set up the budget so you are controlling the budget, not the other way around. To help keep you on track, build a little each week for some spending that does not need to be accounted for. This will prevent the feeling of being broke and reduce the anxiety that comes with it.
- Involve the whole family. It is particularly important that spouses are on board with both planning and spending. Even children as young as three have a basic concept of how money works. Older children can learn the basic parameters of finance and budgeting, practicing sound financial skills with their allowance or income from a job. This will give them real world experience and the ability to learn from their mistakes in a controlled environment. A budget is not about eliminating errors, but creating a system to identify and rectify wayward spending. It also builds accountability and the ability to recognize spending patterns that are not consistent with long term
- Eliminate rationalized spending. It is easy to convince yourself that you deserve a perk because you are tired, have worked hard, or whatever excuse you give for a ‘splurge’. Giving into spontaneous spending may feel harmless. You tell yourself it’s only $20 or $30, but that adds up over the course of a month. $30 less in savings won’t break you today, however, why not have that money working for your true ‘wants’ rather than being spent on something that does not support your long term
- Adjust the budget along the way. This includes celebrating benchmarks of success and making adjustments for things that are not working. If you can’t make it work as a lifestyle change, move things around until you find something that does.
- Catch the dream. Looking 10 or 20 years down the road is sometimes hard to do, butstay focused. But, if you can look ahead, it will be like seeing the city from a helicopter. It can be beautiful and exciting. It will entice you to get started. But when you don’t see advancement from week to week, it is easy to get discouraged and quit. Everything worthwhile takes time. You don’t pay off $50,000 in debt overnight and you don’t pay for 30 years of retirement in 6 months. For this reason, long term lifestyle changes are essential to success. Focus on diligent behaviors which bring you closer to your goal.
Budgets should serve as your guide to financial success. They are kept one day at a time and the small daily choices you make will do more to reach the life you dream about than any lottery purchases. Instead of waiting for your ship to come in, start by building the ship of your dreams today, one board at a time. If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial for a FREE financial analysis today. Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high interest credit card debt any longer. Call (855) 250-8329 or get in touch with us by sending a message through our website here contact-us