MONEY MONDAYS is back!!!!! Here is the Money Monday question of the week:
How closely do you stick to your budget?
A budget that you can actually live with is essential to financial success. Many budgets are unrealistic or are not based upon our necessities and spending habits. For example, if you must drive to work each day and it requires $70 in gas per week, then your transportation budget should not be set at $150.00 per month but rather at least $350. Great budgets are truly built over time based upon information that you acquire as you continually track your spending and modify your budget to fit a more realistic lifestyle.
Don’t be discouraged if you find that your initial or reworked budget needs to be adjusted. Here are a couple of tips that will help you as you work and re-work your budget:
- Before you start budgeting, create a list of what you think you are spending your money on. Once you make this list, spend the next month tracking every dollar that you spend. You can track your spending manually using a ledger or regular notebook or you can use an electronic system such as www.mint.com (I recommend www.mint.com). At the end of this first month, total your spending categories and compare it against what you thought you would spend. Use this and other information to build a first draft of your budget.
- Customize your budget to make sure that it meets your needs. Be sure to include things like school expenses, separate line items for each type of luxury spending that you regularly encounter, savings for sorority/fraternity activities, line items for bank and credit card fees and other items that accurately reflect your lifestyle. The more specific your budget, the better you are able to track your spending and find a budget that you can succeed with.
- It is not always good to cut all of your “luxuries” at once!!! I know that this is contrary to the advice of many but hear me out!!! It takes a very special person to go cold turkey in anything. If you start pairing down expenses until you pair away those expenditures that are unnecessary, you are more likely to reach and maintain your financial success. For example, if you eat out every day, agree to bring your lunch to work for 4 of the 5 working and reward yourself on the 5th day. Even this saving can get your started on the right track. Decide how long you will give yourself to master this budget behavior, then move forward into the 5th day or even other budget areas. Every month you should analyze and tighten you budget until you develop a good working budget. This may make it a longer journey to reach your budget goals but will result in a budget that you can succeed with over a longer period of time.
- If you find that you have spent less than what you have budgeted for the month, immediately transfer that money into your savings. This will help you to resist the urge to squander that money and will increase your savings cushion.
- Once you start to track your spending, compare your actual spending against your projected budget and adjust subsequent months as necessary. If you see that you spending is increasing in a particular area (i.e. increased transportation or food costs), examine the reason for the increase and where necessary be sure to incorporate the increase in future budgets (this also may require that you decrease other line items).
- Even if you find that you are consistently over spending, make a monthly budget and then break that budget down into smaller increments that correspond with your pay date. For example, determine what portion of your monthly expenses will be paid with each of your bi-weekly budget. This will enable you to better manage what you are paying and plan each expense to be paid on time.
- No matter what, don’t stop budgeting. Budgeting is learned behavior that is perfected over time. It’s just like exercise and weight loss. If you fall off the financial horse today, resolve that you are going to lick your wounds quickly, get back on immediately and stay on it for longer next time. This will minimize the impact of a bad financial decision. You will also find that over time there are less slip up and more financial successes.
Regardless of your current financial situation, it is important to make and stick to a realistic budget. Remember, if you fail to plan then you plan to fail!
Have a Happy Money Monday!!!!