Don’t let the good intentions of your financial planning fizzle out before becoming practical realities
According to a recent survey conducted by AARP, less than three-fourths of Americans have a monthly budget they try to stick to. The survey didn’t ask how many people were successful with staying on budget, but previous measures suggest that there isn’t cause for a great deal of optimism.
Creating a budget is pretty easy, most of the time. All it takes is the willingness to spend an hour or two going over income spending habits and making the numbers come out right. Sticking to that budget is something that requires daily attention, though, as every dollar in and out affects your bottom line.
As much as budgets are about discipline, the experts all agree on one thing: a successful budget is a flexible budget. Without a little wiggle room for emergencies, tiny (and infrequent!) splurges and some unaccounted for costs, your budget is almost guaranteed to go out the window at some point.
“Setting too rigid a budget is self-defeating. Like an overly-restrictive diet, you won’t stick to it,” say the editors of The New York Times Practical Guide to Practically Everything. “But slow and steady gains can be made by setting realistic goals as you periodically reassess your target goals.”
Organization is also key in creating an appropriate budget and making sure you stick with it. You have to know what’s coming in and what’s going out, and you have to understand how each day’s expenses and incomes affect your long-term goals.
When you have a detailed and realistic budget — one that takes your real financial situation into account and affords you a bit of flexibility — it’s time to look at ways to cut spending and make sure you stick to your budget.
There are some simple steps: use cash if you tend to overspend on credit cards, set aside a specific amount for discretionary spending each week, move money directly from your paycheck into a savings or investment account and never touch this account for normal expenses. All these are basic ways to keep within your budget.
Other methods of preventing a budget bust are more involved, but often just as necessary. Getting each member of your household onboard with the budget is often difficult, but is an absolute requirement if you want to avoid busting that balanced budget.
“Financial goals and household budgets are very important, but equally so are your marital money rules,” says Daily Finance writer Nicole Seghetti. “Think of this as a contract between you and your spouse regarding how you will work together financially. Establish guidelines for how much money you can spend without having to ‘preauthorize,’ or check in, with your significant other.”
Once the rules are established and a workable budget has been laid out, check in with spending and income regularly—daily, to start out with. If you’re getting off track, figure out why and fix the underlying problem, don’t just tell yourself to “spend less.”
Follow these tips, and you’ll be well ahead of the pack when it comes to future financial freedom.
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