Budgets are difficult because they seem like a recipe for failure. You go into them with the best intentions and then life throws an unanticipated expense your way, rendering your budget null and void. Still, successful budgets do exist. Here are the secrets that set them apart.
When setting a budget, too many well-meaning people focus on where they want to be financially, without a realistic view of where they are. For example, if you know that you spend $80 a month on those Friday night visits to the brewery and you don’t account for that in your budget, it could lead to failure. Maybe you’d rather that $80 a month go to savings, but just writing that as a line item in your budget doesn’t make it so. If that $80 expenditure is a part of your lifestyle, you need to account for it. If you’re really serious about budgeting and saving money, maybe consider going to the brewery every other Friday night and putting $40 in savings.
You went to the ATM and stuffed $200 in your wallet. Two days later, you reach in to pay for lunch and $8 is left. Where did all that cash go? Cash is a dangerous adversary in the world of budgeting because there is no accounting for it. You either have to get in the habit of writing down what you spend cash on (this can be as simple as an ATM entry in your checkbook register: $200- gas, bowling, kids class pictures, gift for co-worker) or take only what you need from the ATM.
Financial guru Suze Orman recommends people save eight months worth of income to cover expenses in the event of a job loss. This is a sound idea, but most hard working Americans bemoan the same thing. There’s never enough money left over for savings. Loosely translated, this means most Americans don’t make saving money a priority. Remember when Grandpa used to say, "Pay yourself first." He meant it. That’s because through experience he knew that if "savings" wasn’t a budget line item right under "rent," the money would disappear. Look at where your money goes. What if that $20 a week you spend on lattes at the boutique coffee shop went to your savings instead? What you would likely find is if you put $20 a month in your savings, treating it as if it were a bill, you’d still have money for the designer coffees. Try it for a month and see.
Willingness to sacrifice
For some, sacrifice is a four-letter word. But every goal comes with a bit of sacrifice, right? So what is your goal? Save up money for a down-payment on a home? Take the family on a once-in-a-lifetime vacation? You'll find only two ways to make that happen: Cut your spending and increase your income. Trim that fat on where you’re spending money and then look for other income earning opportunities. Can you watch the neighborhood kid after school? Can you squeeze a home-demo business into your evening agenda? The point is, goals have a beginning, a middle and an end. The sacrifice is short-term and if you get frustrated or tired from the sacrifices you have to make, you have an end in sight. It’s not forever.
More financial tips