Budgeting is the backbone of financial success. Without it, you have no control over your money. Instead, your money is controlling you. Think of your personal finances like your own personal business. You wouldn’t get very far if you didn’t keep track of your business gains and losses, and the same is true for your personal accounts.
But, great budgeters aren’t just born. It’s a skill that needs to be learned, and you can get better at it over time. If you are new to budgeting or can’t seem to make your budget work, try following these 6 budgeting rules that are sure to get your budget moving down the right track.
Budgeting Rules that Work
Write it Down
The first and most important of all the budgeting rules is this: Write it down. Jotting your monthly budget down on paper makes everything more “real.” Without actually seeing the numbers, your budgeting plan is simply an abstract idea in your head. You’ll lose track of your money and you’ll be left wondering where it all went. Writing it down forces you to actually see the numbers, think about how they relate, and keeps you on track to do what you need to do.
Having a budget means telling your money what you want it to do. Thus, you need to be specific on where you want each dollar to go. What you don’t want to do is just set aside large chunks of money with no purpose, like X number of dollars for bills and Y dollars for spending and saving each month. That leads to overspending and lost dollars. Create a specific category for each of your expenses during the month. Direct your money where to go. Be specific.
If you are only budgeting for $20 worth of food each month, there is no way that you are going to meet your goals. You have to be realistic about the amount of money that you need for each category. Not only is being realistic about your expenses going to help you budget your money properly, it is also going to encourage your confidence. Success builds excitement and momentum. By being able to meet your expected budget, you’ll actually want to continue budgeting. In the same token, failure breeds contempt and destroys motivation. Nobody wants to continue doing something that makes them feel like a failure each and every month. Set your budget up in a realistic way so that you can actually meet your goals.
Don’t Budget too High
In the same way that you don’t want to budget too little for any particular category, you also don’t want to budget too much. If you are overestimating how much you need for certain budget categories just to come in under budget, you are not doing yourself any favors. In fact, you are hurting yourself more than you are helping. Yes, you definitely want to leave room for entertainment. Sure, you need to budget for food. But, you probably don’t need to budget $700 each month for going out and $1,000 for food. If you find yourself doing this, it may be time to look at how you can cut your expenses and start living below your means.
Every month is going to bring different set of financial challenges to your life. You need to be flexible with your budget. You know how much money you have to spend. If you go over budget in one category, that is OK. You simply need to move money from another part of your budget to meet your needs. A budget doesn’t have to be super rigid (although the total amount of money you have to spend should be). It should be a working guide for how you are going to spend your money each month.
Be Kind to Yourself
Everybody goes over budget occasionally. Sure, budgeting rules are meant to provide your money with a purpose each month, but sometimes we fail. Don’t beat yourself up over it. Simply recognize and address the issue so that you can fix it next month. Don’t give up just because you’ve had one bad month. Learn from it, pick up the pieces and keep on keeping on. Just like anything else, you’ll get better at budgeting with practice. Stick to it, and you’ll have your finances rocking out in no time.
What budgeting tips to you have to share? Are there any rules that we missed? Let us know in the comments!