10 Budget Strategies You Can Actually Follow

10 Budget Strategies You Can Actually Follow

It’s one thing to create a budget and entirely another to keep it and make the necessary long-term changes to improve your financial circumstances. Creating a budget is the first step to getting your financial house in order, but not the only step. There is a process, that includes both follow up and revaluation, that is required for success.

Most of us know that you should have a budget but for a variety of reasons find yourself unable to follow it on a consistent basis. Here are 10 elements, that if followed, has the ability to change the way you see budgeting. You will be able to create an effective budget, that will lead to changes in your spending habits, enabling you to reach your long-term financial and personal goals.

Number One: Match Your Budget with Your Personal Goals. Having long-term financial goals makes it much easier to make short-term sacrifices for the better good. Tying these personal goals with current spending habits will help break down larger financial needs into smaller attainable steps. You must set long term expectations to match long term goals. This takes time to achieve.

Most people don’t bank on a lottery win to finance 30 years of retirement, yet somehow think long term needs will suddenly be solved without forethought and planning. You didn’t acquire large amounts of debt overnight, and they won’t be eliminated overnight either. Having specific personal goals and establishing a thoughtful plan for achievement will keep you focused and lead to success.

Number Two: Create a Budget That is Both Written and Measurable. A written budget can be handwritten, on a spreadsheet, or through a convenient app you can use weekly to stick to the plan. When a plan is written you are able to visualize your resources and needs to spend accordingly. Adding an element that can be measured helps you recognize and celebrate successes, while finding weaknesses quickly. These challenges can then be tweaked or altered to match your reality.

Number Three: Simplify and Categorize. Budgets do not need to be complicated. With today’s technology you can track purchases on debit cards or credit cards and account for every dollar. Creating large categories such as food, transportation, utilities and entertainment enables you to prioritize spending and see where you are at a glance. For example, if you have a $500 food budget and you have spent $350 by the 15th, you know you need to cut back for the next two weeks to stay on track. You will then be able to make adjustments in real time.

Number Four: Review Regularly. Life is not static and a budget can’t be either if it’s going to be effective and useful. The purpose of a budget is not to control your behavior, but to lead you to a long-term view of what you want your life to be, rather than where you actually are. As your circumstances change or expenses alter it will be necessary to adjust the budget accordingly. This might include a debt being retired, a child starting school or you taking up a new hobby. Any new activity can change the demand for your dollar.

Number Five: Automate the Process. Bills and savings that you automate have a much higher rate of success because you won’t have to make a decision each week about where the money is going. You don’t forget to pay a bill, resulting in a late fee. You have money in savings when unexpected bills come up and your financial picture looks better. Online apps or web-based programs also provide graphs and charts to make it easy to see where you’re at on any given day. When discretionary money is left in your account is easy to spend on impulse purchases, rather than long-term financial goals. Sticking with the budget does take a certain amount of self-discipline and self-control. Automating the process reduces the constant temptation to overspend and helps you to “plan the work and work the plan”.

Number Six: Be Flexible. A budget is a constant work in progress because your life is very dynamic. Circumstances change, income goes up and down, and new bills arrive on a regular basis. Building flexibility in the budget will give you funds to cover unexpected expenses. You will continually adjust the budget as your needs change.

Number Seven: Get Everyone on Board. This process should involve everyone in the family including your spouse and children. Studies have shown that children as young as three years old can understand basic money principles. The more invested the family is in the process, the higher degree of success you will achieve. Part of keeping everyone involved is having everyone contribute. Perhaps you are saving for a vacation. Have the children set aside allowance or complete tasks to earn money that can be used for the trip. When the family is focused on the same goals it makes saying no easier for parents. It also provides parents with the opportunity to teach children about the value of money and setting priorities. Often saying NO is less about being able to afford something, and more about where the money can be better utilized.

Number Eight: Minimize Rationalization. When you want to buy something, or take advantage of a bargain, you quickly rationalize the sudden need for a certain item. Justifying unplanned purchases can destroy a budget. Consideration should be made for any purchases not built into the existing budget. “You deserve it,” or “it’s a great deal,” does not make it a need.

When you do rationalize an unplanned purchase take a second look at the monthly budget and cut back in other areas to accommodate the extra spending. If you know you have to give up something else, you will be less likely to rationalize unneeded purchases. Having an accountability partner can also curb rationalized and unplanned spending.

Number Nine: Celebrate Successes and Tweak Failures. Find ways to reward staying on track. This will help you stay motivated and focused on making permanent changes to spending habits rather than a short-term push for cost reduction. The most successful budgets are those that build in long-term behavior changes and looking at money differently. If the budget is not working, evaluate what went wrong, tweak it to meet reality, and move forward.

Number 10: Maintain a Long-Term View. Budgeting behaviors can mimic eating behaviors. It is common knowledge that when you go on a diet the weight typically does not stay off because long-term changes have not been made. That is why for the most part diets don’t work. As soon as you meet your goal, you go back to eating and exercising like before and you quickly return to the same position you were in before. Budgets work the same way. If you try to maintain a very restrictive budget that eliminates all pleasure is not likely to be successful. You may pay off all your debt, just to run it back up again. Looking at a long-term focus on changing spending habits and changing the way you think about money will provide the best long term financial success.