10 Tips To Make Sure Your Financial Budget Will Succeed
You’ve
analyzed your past expenses, put them into spreadsheets, loaded Quicken
with all of your data and come up with a budget. Now what? The tough
part! You actually have to stick to your budget and put your plans into
action. This is easier said than done. In many cases you will have
forgotten about your budget and your financial goals 6 months or a year
down the road. How do you keep this from happening to you?
Here’s how. Make sure you follow some of these tips below
You’ve
analyzed your past expenses, put them into spreadsheets, loaded Quicken
with all of your data and come up with a budget. Now what? The tough
part! You actually have to stick to your budget and put your plans into
action. This is easier said than done. In many cases you will have
forgotten about your budget and your financial goals 6 months or a year
down the road. How do you keep this from happening to you?
Here’s how. Make sure you follow some of these tips below so this doesn’t happen to you.
1.
Create your budget with realistic targets – Let’s say one of your
budget goals is to not eat out for lunch or dinner on a regular basis.
If you are honest with yourself you may find this to be an unrealistic
goal. Sometimes it’s a nice break to eat out and have a relaxing
rewarding evening. In other words, don’t set the bar too high. Drastic
and unrealistic goals are one of the surefire ways your budget will not
succeed.
2. Budget for expenses that don’t occur on a routine
basis – Make sure you give consideration to expenses that occur once a
year, such as holiday presents, birthdays, vacations, weddings, car
maintenance costs, etc. These expenses don’t occur every month and they
will bust your budget plans wide open. Make a list of these events on a
calendar and put a dollar figure to them. Place them in the month they
are expected to occur so you can plan in advance how you will pay for
them. The regular routine expenses are not the reason your budget will
fail. It is these all of a sudden stuff ,surprises,just popped up,
coming up stuff or events now, that will wreck havoc on your budget if
you don’t plan for them.
3. Write your budget down, yes put your
budget in writing – Take the time to write down your budget plans.
Making a mental note of your budget goals is a recipe for failure. Don’t
assume that your financial future will take care of itself by making a
simple mental note to yourself. If you have your budget goals detailed
in writing you can review and remind yourself weekly and monthly of your
financial goals.
4. If you have a bad month or week, don’t give
up! – Let’s say you have been reaching your budget goals for three
months. In the fourth month, for whatever reason, you didn’t reach your
budget goals. Maybe you even stopped trying to stick to your budget! If
this happens, don’t just throw your hands up in the air and admit to
failure. Everyone falls off the wagon sometimes. Your budget is a
journey. There will be bumps in the road, so the key is to realize that
everyone makes mistakes. This relates to a story I like about a great
old time golfer named Walter Hagen. Before each round of golf, he told
himself that he would have 4 or 5 bad shots. During the golf round, if
he hit his ball into a bunker, he would tell himself, “There is one of
my bad shots that I was expecting”, hit the ball out of the bunker and
move on. It didn’t phase him one bit because he had knew there would be
some bad shots in his round.
5.You will need to adjust your
budget over time – This one is a biggie! It can take months or even
years to fine tune a personal budget. When you initially made your
budget plans, you probably had to guess at some of your figures. They
might not have been in touch with the realities of every day life. For
example, you may have underestimated your monthly grocery or utility
bills. If this happens, analyze all of the underlying money that was
spend in this category to see if your initial estimate was unrealistic.
If it was, try to come up with a more accurate number and then to stick
to that new figure. It is this type of adjustment that is one of the
keys to making sure you can stick to your budget.
6. Review your
budget every month – This is where you will make any adjustments that
are needed. Set aside the first day of each new month to review your
income and expenditures and match them to your budget goals. By actively
reviewing your finances and comparing it to your budget, you can adjust
your spending habits. This gives you a chance to analyze areas that
exceeded your budget expectations and make the adjustments in your
spending habits or your budget. The goal here is to not forget about
your budget. Put a printout of your basic budget goals on the
refrigerator anywhere it is visible for you. That way every day,
several times a day, you notice your budget goals sheet. You may not
read it every time, but you notice it and it reminds you that need to
stick to your budget. That is why tip number 3 is so important.
7.
You have to set specific short-term goals – Let’s say one of your
budget goals is to have all of your credit card bills paid off in two
years. If your credit card balances total $20,000 that would be $10,000 a
year. Divide that number further into quarterly reductions in your
credit card bills, in this case $2,500 every 3 months. Now, this is a
more tangible budget goal to shoot for isn’t it? I find that when I
divide intermediate and long term goals into short-term tangible
stepping stones, I am able to feel a greater sense of accomplishment and
am more likely to succeed. This brings us to number eight…
8.
Reward yourself – That’s right! Treat yourself when you reach some of
your short-term goals. Since your financial budget is really a journey,
take some time to smell the roses on your way. Sticking to your budget
should not be a restrictive, unpleasant experience. Not only should you
take the time to enjoy your financial accomplishments along the way, and
still have some fun and use a part of your budget for things you like.
Just make sure your rewards don’t end up breaking your budget!
9.Don't
forget pay yourself first – I’m sure that one of your budget goals is
to save and invest a portion of your income. One of the keys to make
sure you succeed at this is to do what the IRS does with your paycheck,
take it out of your discretionary income immediately. This way, the
money is saved away right off the bat. Move the money immediately into a
savings or mutual fund account. Many mutual fund companies can setup
automatic deductions from your paycheck. Despite your best intentions to
save, the hectic, daily demands of life can reduce the amount you are
able to save.
10. You have to have the right attitude, attitude
is everything – When most people think of a budget, they picture
restrictions and pain. Almost like a diet. You know what happens with
most diets? They don’t seem work for long! First, if your budget is too
strict, too restrictive on your spending, it won’t work either. However,
you will need to limit your spending in some areas and this will take
some adjustment in your attitude. When you feel limited and sorry for
yourself, and when you can’t purchase something that you might want,
remember your financial goals that you set with your budget. Now think
about the satisfaction you feel when you reach those goals. Over time,
you find that you don’t want to disappoint yourself by breaking your
spending goals on a spur of the moment purchase. You will most likely
get more pleasure knowing that you are reaching your budget goals when
the thought of an impulse purchase crosses your mind.
If you
follow these tips, your budget plans are more likely to be a great
success. By taking some simple steps you will find that living within a
budget is not as tough as you imagined it is about attitude. It can
actually be fun and rewarding! And those rewards are a good thing
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