The Dreaded Budget

Okay, so we all know that we should be creating a budget and sticking to it, right? Now here is the real question: "How many of us actually do it?" My guess is that not too many people have actually sat down and created a budget, let alone been able to strictly follow a budget in order to reach a financial goal. So, here is my point, I'm no expert, but if you don't take the steps to actually know how you are going to reach your goal, what is the point of setting a goal in the first place? Most everyone has a financial goal, something they would like to be able to do financially. Not everyone's goal is the same, but whether you are trying to save money, spend less, or maybe see where you could afford to spend a little more, sitting down and planning out a budget is how you get there. Now before budgeting, you need to analyze how you are currently spending your money. You might think you know where all of it is going, but the truth is most people are surprised what they find when they actual write it all down and add it up. I found this handy budget calculator on MSN.

THE 50-30-20 BUDGET

Feel free to use another method, I have always just written my spending down at the end of each month, and many people have other software tools to help them analyze current spending. I found this tool more helpful than my usual way of calculating, solely because it puts everything into a pie chart. I like being able to see exactly how much I spend in each category, and the pie chart allows to visually see this. I also like that it provides a list of things you might not normally think of when you write down your monthly expenses.

So now you have analyzed how you are currently spending your money. This can be a real eye opener for some, so take some time to soak it all in and really evaluate your spending habits. After this, it is time to set your budget for the following month. Make sure when you are doing this you keep in mind your past expenditures and your goals for what you would like to accomplish with your money. You can use the same tool as above, but you also might want to use something different depending on your goals.

Now that you've set up your budget you are home free! WRONG! Now that you've set your budget, you can't just leave it and expect it to happen on its own. The purpose of your budget is so that you have something you can follow that can guide you through your monthly spending and keep you on track to reach your goals. Make sure you keep your budget in a visible place where you will see it often. I have tried several places for mine; beside the bed with the book I'm currently reading, on my desk next to my bills and receipts, and I've even stuck it up on my refrigerator. Find a place where you know it will be seen so you can have a constant reminder of your goals and how you intend to accomplish them.

Some people like to use the same budget every month. I like to create a new one each month for two reasons. 1) It allows me to examine my spending and see if I was actually able to stay within my budget. What is the point of creating a budget if you don't measure the results? Did you spend too much on entertainment or eating out? Did you allot enough for your utilities at the end of the month? Figure out if you need to be better at sticking to a certain part of your budget or if you can allot more toward savings or another area. My point is: you can't accomplish anything if you don't know what you have accomplished. 2) Creating a new budget each month allows for different needs within different months. Every month is different. Some months you may need to allot more into your auto budget if you are due for an oil change or new tires. There may be a  month where you need to buy a gift for someones birthday or anniversary. None of these things really qualify as emergencies (unless you have a blowout which requires you to replace tires on your car), so you need to plan to pay for these things in other areas of your budget. It is okay for your save vs. spend ratio to vary. You don't have to always save the same amount each month. Make sure, though, not to let yourself get carried away thinking you can just put more into savings next month. If you let your savings go without adding to it, chances are you will have an emergency come up and then you won't have anything to fall back on.

The best way to accomplish your financial goals is to have a plan and follow it. Analyze your habits and create a logical plan that you can follow, then hold yourself accountable and assess how well your plan worked. Make the necessary adjustments and proceed to repeat the entire process again. If done right, you should be able to notice small achievements (in relation to the size of your goals) within the first couple months. The key is to keep at it and make your budget work for you. After all, that is the purpose of a budget!