The concept of creating a household budget in and of itself is not that hard to understand. You need to know what your income is and what your expenses are so you can balance the two. Hopefully, you find your expenses to be less than your income.
But the reality of creating a budget can sometimes prove to be more difficult. For example, what if one or more of your expenses fluctuates each month? What if you find you have trouble sticking to a budget over the long-term? Here are a few tips I’ve learned about creating a budget you can live with.
Don’t Be Too Strict
One of the biggest reasons budgets fail and people find they can’t live with their budget over the long-term is because they are too strict when creating their budget. It’s not going to be a budget you can live with if you aren’t being realistic about how much you actually spend on different aspects of your life.
For example, if you find yourself going over budget on entertainment every month, it would be more realistic for you to increase that category of your budget by a few dollars than to continue beating yourself up for going over.
Track Your Spending First
People often think budgeting is the first step to getting your finances in order, but I disagree. Instead, I think the very first thing you should do is track your spending. As I said before, you have to be realistic when creating your budget. There’s no way to know how much to budget for your variable spending if you haven’t been keeping track of it in the past.
When I created my first budget a few years ago, I used the average spending from 3 months’ worth of tracking. This way I had a good idea how much to budget for variable things like groceries, dining out, and more. It saved me from having to make ongoing adjustments to my budget. The more adjustments you have to make during the first couple of months of budgeting, the more likely you are to give up and think budgeting doesn’t work.
Keep it Simple
Another mistake I see a lot of people make when it comes to budgeting is making it overly complicated. Sure, it’s great to have all of your spending divvied up by category, but having too many categories can make it cumbersome to keep track of your spending and figure out how much you have left for the rest of the month.
I used to make my budget too complicated. I had cash envelopes for dining out, entertainment, groceries, household spending, pets, and more. When I would go to the grocery store, I would end up doing two, or sometimes even three, separate transactions at the checkout so I could keep track of my household expenses (like paper towels, toilet paper, cleaning supplies, etc.) vs my groceries vs my pet expenses.
After a while, that grew cumbersome and I got frustrated with my budget and how long it took me to go to the store each week. Now, I lump those things together. Granted, it does make it a little more difficult to see if I’m overspending on specific things, but it’s a lot faster and more convenient for me. And, let’s be honest, the easier something is, the more likely we are to keep it up over the long-term. This is key for creating a budget you can live with forever.
Make Adjustments as Needed
I know I said earlier that making too many adjustments to your budget can be a bad thing, but on the other hand, you have to make sure your budget is suited for your life. The reality is, life changes and if your budget doesn’t change with it, there’s no way you’ll be able stick to your budget long-term. This is why you need to sit down and plan out your budget every single month, because no two months are ever going to be the same.
Look ahead at what special events you have planned for the coming month and try to anticipate how they might affect your spending.
For example, if you plan to go on vacation next month, maybe you don’t need to budget quite as much for groceries since you won’t be eating at home while you are on vacation. But, you might need to budget more for gas to get to your vacation destination, unless you’ve already accounted for that in a separate vacation budget.
You Might Need More Than One Budget
I just mentioned that you might have a vacation budget in addition to your regular monthly budget, and this is just one time when you might need more than one budget. Other things that might cause you to need more than one budget are things like parties, special events, weddings, or even relocating to a new home. If you’ve saved for these things in a special savings account, chances are that you’ll need a separate budget for them too.
In fact, using a special budget for these types of things will ensure that you don’t overspend your regular, monthly budget, or overspend your income.
The Bottom Line
The truth is, budgeting is a process and it changes over time. You may find that what used to work for you last year, or even last month, no longer fits your lifestyle. That’s ok! Just don’t give up on budgeting. Keep at it, make changes, and find a way to create a budget you can live with. Budgeting successfully can help you reach all of your other financial goals, which is why it’s so important to create a workable budget you can live with.