How to Keep to a BudgetPosted on: March 24, 2010
Creating a monthly budget is critical, but sticking to it is actually more critical. A budget is useless if it's not put it into action. This hard to do. The trick is to overcome these obstacles by finding ways to make a budget easier to work with so that there is a sense of control over finances.
One way to make sure you stick to your budget is easier to stick to is to take advantage of automated banking. Have your paycheck deposited directly into your bank account. This saves you a trip to the bank, plus you'll know exactly when to expect funds to be available. In some cases, direct deposit means you'll have your money the evening before the actual payday as employers do the drop ahead of time instead of in the morning.
Also available are automatic debt payments. Sometimes, you'll even get a discount for using this payment method because banks like the fact that you're far more likely to pay on time. Less hassle for them, and less hassle for you.
The trick to using automatic payments, whether the creditor is taking the funds out or your account is generating payments, is to remember that the balance you see in your account at any particular time is not all “found money.” It's a combination of expense money that hasn't paid out yet and cash for the other purposes you've allocated in your budget.
Automated payments are not for everyone. If that's the case, make sure to keep a calendar of when payments are due. When you get paid make sure that all your bills and other expenses are accounted for. A good strategy is to write out the envelops for monthly bills ahead of time so you can immediately write out checks and allocate cash immediately once the paycheck clears.
Don't forget to include an envelope labeled “me.” This is to make sure you remember to reward yourself – and also to make sure you do not exceed the amount you have allocated for disposable cash. If you have extra funds, save them for future expenses or apply them toward a savings long-term or short-term savings goal.
An important point to remember is that budgets can get disrupted. Sometimes unanticipated events cost more than someone's planning ability or exceed the money available in their emergency fund. Hopefully at these times there are enough savings on hand, but if borrowing is needed, then that's what will happen.
The key is to rebound and not let these events permanently throw off a budgeting plan. Continue to track and plan for regular expenses and adjust the budget to incorporate any new financial needs from events. Over the long-term, the budget will keep finances in order and provide that sense of control so critical to financial good health.