The following is a contribution from Kalen at Money Mini Blog.
Imagine that you decide that it’s time to take control of your money, so you start a budget. You figure out which categories you want and set some amounts. Everything’s going great and then you forget to track a purchase or two, or three. Then your grocery bill goes way over budget and you end up needing to pull money out of your savings account.
You think you suck at budgeting. But here’s a little secret:
This happens every time someone starts a new budget and there are some things you can do to stay on track and actually make this budgeting thing work. Here are a few hints to help you stack on track with your budget.
1. Start With Tracking
I would bet that most budgets fail within the first month or two. It’s exciting at first, but after a few weeks it may start to get difficult. When you start a budget, the first few months are for tracking your expenses. If you haven’t lived on a budget before, you won’t really know how much you’re spending in each area. So here’s what you do:
- Write down every single purchase.
- At the end of the month, go over all your purchases and put them into categories (groceries, auto, entertainment, etc.)
- Do this for a few months to get an idea of how much you spend in each area, then create your budget.
It may take several months before you start building an accurate budget, but the first few months are crucial to its success.
2. Accept Failure
There will be months when you overspend and days when you forget to put purchases in your budget. That’s fine. Everybody does it. Accept failure as a learning experience, but use what you learn to make a more accurate budget.
Don’t give up. It takes years to perfect a budget, if that’s even possible. If you mess something up, keep going. It’s just one stumble and it’s going to happen. The most successful budgets have missed many times before they hit the mark.
3. Create a “Blow” Category
Before this gets weird, let me say: I’m not advocating drugs. I’m talking about creating a category for money that you’re free to “blow” on whatever you want each month. This fund is often the reason a healthy budget is well, healthy.
Figure out how much your “blow money” will be, based on your finances. It may only need to be $20/month or you may be able to get away with $50, $100 or more. Including this category is important to make sure you budget runs smoothly. It gives you the freedom the spend or “blow” some money on you.
All of those spontaneous and random purchases for yourself fit into this category.
4. Make Budgeting Easy
This is the most important point. Make your budget easy and accessible and do what works for you. There’s no need to create an in-depth spreadsheet in Excel, if you know you won’t use it. Figure out the best method for you.
It could be a paper budget, a spreadsheet, an app or budgeting software. If one doesn’t work well for your lifestyle, try another one. There is something out there that fits you and your budget. There are even free budget tools available online that you can use.
The point is there are resources available that you can make work for you and your specific situation.
5. Make it Automatic
With all the budgeting software available today, it’s easy to automate your budget. You may prefer the control of a manual budget or you may just like typing in all those numbers. I know I may sound sarcastic, but I actually prefer doing it manually. Though I must admit: automation definitely makes things easier.
Automated budgeting software lets you link your banking and investment accounts with a program that then tracks all your expenses for you. Even though I track my budget manually, I still use Mint.com almost like a backup.
I have all my finance accounts linked to my Mint account and I use it to look for trends in my spending and my progress on my financial goals. Another option and good alternative to Mint is Personal Capital and its offering of the ability to track your investments and credit card accounts as well.
There’s no more room for excuses. Go out and create the budget that works for you.
What budgeting style works for you? What do you use to keep track of your budget? Share in the comments!
Author Bio: Kalen Bruce is the founder and main writer at MoneyMiniBlog, where he writes short, sweet and simple articles about money and productivity. Kalen lives a debt-free life with his wife and four children.