Having a budget is key to financial wellness. You must spend less than you earn to be financially well and they best way to do that is keep track of what you spend (creating a budget). There are a few tricks to putting together the “perfect budget.”
Always start from scratch. Never start a budget from an old draft of a budget. Usually when you go in to make changes it is because something in your finances has changed. If there is one change, the entire budget will need adjusting. For instance, when you get a new job that pays more, you may need to adjust how much money is allotted for savings. You may also decide to buy a car and have a car payment. Either of these things will affect your budget significantly. Start from scratch each time you start or adjust your budget.
Focus on what matters. Make a list of things that matter to you that you pay for each month. You have to have a list of needs and a list of wants. When it comes to the wants, you may have to make some cuts. For instance, if you go and get your nails done every other week but have not been able to afford your car payment, you should probably take a break from the nail salon.
Prioritize your debt. When it comes to paying bills and paying off your debt, you have to have priorities. The debt you have that is higher interest should be paid off first. Your debt should be paid after your bills (the necessary ones, not the nail salon). Make a list of your debts and begin to pay off those with higher interest rates first. Pay the minimums on the rest.
Use the tools you have. You can download apps that will help you better control your finances. Mint, an app for your smart phone, is a great thing to use if you are trying to save and budget. You can also download other apps for banking and debt management to better control your finances as well.
Realize your weaknesses. If you know you have a weakness where finances are concerned, realize it. For example, you may be able to stick to your budget 100 percent until it comes to food. Maybe you like to go out to eat. Instead of “punishing” yourself and not allowing yourself to go out, treat going out to eat as a reward for sticking to your budget better.
Allow yourself some wiggle room. Although budgeting is about self-restraint, you should allow yourself some wiggle room. No one can go to work, pay their bills and stay home all of the time. Give yourself an allowance for going out (or doing your favorite extracurricular activity) once a week or once every other week.
Adjust your budget when it is necessary. Budgets aren’t set in stone. You should always write yours out in pencil because it will change (and sometimes it changes often). Whether it be the loss of a job, change in professions, a new addition to the family or an additional bill, you will have to make changes to your budget. It is recommended to review your budget quarterly to make changes.
Lastly, always stick to the budget that you make. If you cannot stick to it, you are wasting your time making it. If your budget is suffering, go back and adjust it so that you are better able to stick to it.
Do you have a budget that works?
Photo: Flickr: Tax Credits