Bring up budgeting in polite conversation and you’ll likely elicit yawns. Many people struggle to follow a budget, if they even have one at all. Yet it’s important to have a budget because it provides structure to your entire financial life. It can be very intimidating to start one, but I’ve learned that budgeting isn’t as hard as you initially think, and it can be fun and freeing. Here are five steps to develop a successful budget and stick to it.
Decide how you want to keep track of your budget.
I use spreadsheets and track every cent of my income and expenses, using Google Sheets since it is free and uses cloud storage, so you can access your budget easily from your phone or computer. For many people, that approach might not be realistic. I would recommend using Mint or another similar app. Mint is a great app from Intuit, the creators of QuickBooks and TurboTax. I have used Mint before and it helps with every part of a budget. You can set up categories and track your spending, income, and bills simply. You can also set reminders for bills and connect Mint to your banks.
Make your budget realistic.
Take a hard look at your income and expenses and base the first month or two on what you’ve done historically. The goal of a budget is to build structure and financial consistency, as well as saving more money for yourself. However, you need to follow what you set so don’t expect to cut your costs in half in the first month. Organize your budget into different categories with a specific budget for each. The sooner you start paying close attention to each expense, the sooner you can identify trends and areas of opportunity for yourself.
Set yourself up for success.
This means putting yourself in a position where you can really stay within your budget for every category. For example, if you want to reduce how much you spend on eating out, you will want to think ahead and make sure you have groceries at home to lessen the temptation of getting food on your way home or just out of convenience.
This sounds counterproductive but giving yourself room to play with your money is important to your success. Make sure you have room in your budget for personal spending money. Whether it was for games or entertainment or just a treat, I found that I often felt guilty about spending money on myself. Without having guidelines, I often felt like I “should” save more money or spend it on more important things. Giving yourself a set amount of spending money is freeing and allows you to do whatever you want with that money without worrying about not being able to afford the “more important things”.
Set goals as part of your budget.
It’s much easier and more enjoyable to save money or spend less in certain categories if you have a specific goal in mind. Setting savings targets every month can become a fun competition with yourself.
These five steps have helped me consistently follow a budget for years. Budgets will always vary as you go through different seasons of life. However, if you budget well, you will be able to rest easy knowing that your finances are in good order.