Tips for Sticking to a Budget

Everyone has, at some point, created a budget to help manage bills or save for a future expense. For some, the budgeting process involves spreadsheets and charts, yet for others, it may be a series of scribbles on a notepad or even a napkin. The good part about budgeting is it allows us to plan ahead for future needs and perhaps even create a “slush fund” to dip into when we have an urgent financial need. Budgeting also ensures we can pay our monthly expenses on time which will inevitably help improve our financial bandwidth. The downfall to budgeting? Most people struggle to stick to the budget they create for themselves. Unfortunately, when extra money comes in, it often goes out just as quickly. Especially when we put ourselves in charge of managing our budget. For some, turning to a team of professionals to help with your initial budget outlines and long-term budget management tools may help you stick to your plans. 

What Does it Mean to Create a Budget? 

A budget is defined as “an estimate of income and expenditure for a set period.” But what does that mean in simplified terms? When you set a budget, whether a personal budget, household budget, or a budget for your business, you create a plan for how to save and spend your money. The actual plan you create is your budget. When you make a budget, you take inventory of all of your incoming money, followed by determining all of your necessary financial obligations (bills, etc.). Designing a budget helps you choose the best course of action for using your income stream (personal income, business revenue, stock or investment income, etc.) to manage your expenses. 

Tips for Sticking to a Budget

When you contact a professional to help with setting a budget, they may provide a few important tips for helping you stick to a budget. A couple of examples may include:

• Follow the 50/30/20 rule (or similar)- 50% of your income to essentials, 20% to savings, and 30% to non-essentials. 
• Create your budget at the beginning of the month-plan ahead for monthly expenditures and stick to your plans. 
• Separate needs from wants when budgeting. 
• Keep receipts and bills organized so you can reference them if needed.
• Make debt repayment a high priority. 
• Remember to contribute to retirement and savings before contributing to surplus spending accounts.
• Use separate accounts for essential expenses and surplus spending. 
• Examine and (if necessary) adjust your spending monthly.
• Use direct deposit to help ensure funds get where they need to. 

The Importance of Having a Budget

The idea of setting a budget is easy, but sticking to what you create is not always as straightforward. Remember, having a budget is essential. Budgeting allows you to understand what your monthly cash flow looks like and get a better idea of where your money goes each month. Budgeting will also help you make sure you set enough money aside each month to pay your monthly financial obligations before spending money on “extras” that may not be necessities. 

Budgeting will help you keep your extra spending in check, but it can also provide a visual representation of how well your income covers your monthly expenses. This visual representation will allow you to make adjustments to your spending if necessary. If you feel you come up short each month on meeting your financial obligations, you can use your budget to see where your money is going and make the necessary adjustments for the following month. 

Creating a budget on your own may feel like an overwhelming and complex task. If you want to create a budget but do not know where to start, you can contact a professional financial services company for assistance. Let the team at Elevated Credit Services help you learn more about how budgeting can help you.