With so many different approaches to budgeting, it can be easy to become disillusioned about the feasibility of actually adhering to a plan. Some people see budgeting as a way of setting themselves up for failure. After all, you can create half a dozen budgets and see all of them fail if you don’t put careful thought into them. Budgets fail for a number of reasons. Some people forget to account for all their expenses and end up spending much more than they expect. Other people may make budgets so stringent that they burn themselves out trying to keep track of every penny.
Budgeting is not easy, but the tips below can help you create a robust, realistic budget that you’ll want to follow.
Set a realistic goal.
When you make a budget, you need to have a goal in mind to motivate you to actually follow the spending rules. The vague goal of “managing money better” often does not provide the needed degree of motivation. Goals should include clear and actionable items, such as placing a certain sum of money in an emergency fund or saving a specific amount for a vacation. Some other great goals include purchasing a new car or saving for a down payment on a house. Such goals allow you to figure out exactly how much you need to save each week or month, which can help you break your goal down into smaller, achievable steps. Ultimately, these goals should motivate you to keep your spending in check.
Use technology to track expenses.
Traditional wisdom often says that you should use a pen, paper, and calculator to track expenses, but that can prove time-consuming and overwhelming. You certainly need to keep track of your expenses, but a wide range of apps and websites are available that will allow you to do so automatically. Mint remains one of the most popular apps, but there are several other options as well—PocketGuard, You Need a Budget, Wally, and Level Money are just a few. These apps and websites provide helpful features, like the ability to see your spending in different categories of expenses, such as entertainment, groceries, gas, and more.
Simplicity is key.
Too often, people make their budgets too complicated by dividing their spending into dozens of categories. This categorization may seem helpful at first, but for many people, it will prove unwieldy. Simpler systems can help you avoid the feeling that your budget is too constrictive—you don’t necessarily need that many categories. Even a three-category system of “household,” “debt,” and “savings” can work for some people. If your expense categories seem overwhelming, the first thing to do is adjust them rather than rebuilding from scratch.
Be as honest as possible.
When creating a budget, it’s easy to lie to yourself about your spending and how far you’re prepared to cut back. This lying comes from the best intentions, but it ultimately sets you up for failure when you cannot adhere to strict guidelines. You need fun in your life, so eliminating all spending on entertainment or dining out will make you more likely to cheat on your budget and fail to meet your goals. You’ll probably have to cut out some fun things, but leave room for your favorite activities, even if you do them less frequently. It’s all about being realistic about what you can give up from your current lifestyle—not becoming a monk.
A monthly budget is not best for everyone.
Most people think about their budget in terms of monthly expenses, but the 30-day framework is not necessarily the best option. If you struggle to adhere to a 30-day budget because you overspend in the beginning and come short at the end of the month, you may want to switch to a weekly budget. This shorter time frame could help you stay on track. In contrast, lengthening your budget to a three-month period (or longer) can provide extra flexibility during those times when you have many large expenses. In addition, many people enjoy budgeting from paycheck to paycheck, so that they know exactly how much of each check goes to each of their spending categories. Experiment to see what works best for you.
Never underestimate the power of rewards.
For many people, adhering to a budget is painful. Budgets often mean sacrificing some of the things you want, and this continual sacrifice can make it tempting to give up and quit altogether. A great way to avoid this sort of exhaustion is to build rewards into your budget. At the end of a particular period, plan to give yourself a bonus for staying on track—a prize like this can help you avoid feeling resentful about your budget. For example, forgoing your habitual morning Starbucks stop becomes easier if you know that you can have your favorite Frappuccino in a couple of weeks. Of course, the ideal reward depends on what you like. Some people may enjoy a nice dinner, while others will want a few new books or a new pair of shoes. Ultimately, your reward should be something that you look forward to and that makes your budget worthwhile.