It’s not always easy to manage your money, but building a budget doesn’t have to be as painful as body building or dreadful like dieting.
You can take control of your finances and build a budget that prioritizes your most important goals. Your budget can—and should—suit your lifestyle so that you can live as you like within your means.
So, what are the secrets to budget building? Here are nine simple steps for you to build a budget for your lifestyle.
[Read: Get Your Top Budgeting Questions Answered]
Goals: Setting, Scheduling, and Prioritizing
1. Set Goals
Where do you want to be financially in five years? What about in ten or twenty years? Set short term and long term goals for your budget, no matter where you are starting from.
Once you’ve decided what you are working towards, take a good look at your current situation. If your goal is to pay off that credit card debt, assess how much debt you have and what it will take to eliminate it. Don’t bury your head in the sand. Face reality so that you can take charge and move forward.
2. Determine a schedule for your goals
Turn your dream into goals by setting deadlines. Napoleon Hill, a financial success author, wrote that “a goal is a dream with a deadline.”
How soon are you going to accomplish your financial goals? It’s a good idea to have goals for the short term and the long term, so make a timeline with more than one end date on it.
3. Prioritize Your Goals
Make your budget goals a priority. If you are trying to buy a car, put away a set amount each month, no matter how small it is. Even if you save only $10 a month, you’ll have $120 towards your car at the end of the year. Start small, and increase when you can.
How to prioritize goals:
- Set up automatic transfers to your savings account or to pay down debt
- Open a sub-account for specific savings goals
- Save as much as you can each month
- Put extra money towards your goals
- Learn to say “That’s not in the budget right now”
Spending: Starting, Tracking, Adjusting
4. Start Small
Be realistic. If you cut out all pleasures or you resolve to double your savings by cutting your grocery budget in half, you probably won’t make it past the first month.
When you blow the budget, learn from your mistakes, and get back on track with your budget goals.
Make some modifications if necessary. Set aside a modest amount for stress relief or indulging your wild side. Search for ways to have fun without spending money.
5. Keep Track of Your Spending
How did that trip to the grocery store for eggs and milk add up to $30? Oh, the ice cream and orange juice, plus the $20 cash back for toll roads and parking…
If you don’t know where you money is going, you aren’t empowered to make changes. Keep track of where, when, and how much you spend.
Ways to Track Your Spending
- Online Spreadsheets like Mint and MoneyStrands
- Budgeting Apps and Software—some of these even give you cash rewards or coupons
- Transaction Register
6. Be flexible
Categories in your budget are flexible. If you need extra money for a child’s field trip, take the money from another area, such as entertainment. If your electricity bill is higher than expected, cut back on the treats you purchase this months.
Unexpected expenses are not an excuse to overspend. They call for creativity and sometimes some extra discipline.
Progress: Checking, Coaching, Celebrating
7. Check Your Progress
How are you doing with that budget you built? Can you see progress towards your financial goals? Monitor your progress regularly.
Once in a while, a significant expense such as medical bills or car repairs might strain your budget. Find ways to work around this. Build an emergency fund so that you don’t find yourself in the red month after month.
8. Find a Budget Coach
If you’re having trouble building a budget or sticking to your budget, reach out to a budget coach. He or she will keep you motivated and suggest new tactics for you to try.
The National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies are two organizations that offer financial help.
9. Celebrate your progress
As you monitor your goals, take note of positive points. You met or exceeded your budget goals this month. You put extra money into savings. You’re halfway to getting that car. Awesome!
[Read: How to Make More Room in Your Budget]
The point of all this is to improve your financial situation so that you can live the life you want. Build a budget that works for you and then stick to it so you can be in control of your life.
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