10 Tips For Writing An Effective Budget

In these troubling times, it’s important to make sure you keep track of every penny that you spend. One effective way of controlling what you need to buy and how you spend your money is by creating a personalized budget. Many people have trouble drawing up an adequate budget that fits their income, but these 10 tips are the cornerstone of drawing a budget out that will help you save money in the long run.

1. Know Where Your Money Goes

It is impossible to build and stay within a budget if you don’t know where your money goes. With detailed debit card and credit card statements, you can quickly analyze most of your expenditures. List company names; note an explanation for the expenditure. Get into the habit of saving all of your receipts and jotting down any pertinent information. This new habit will give you a clear view of your current spending state of affairs, and it will help you keep track of how your budget is functioning.

2. Analyze Your Spending Habits

Purchase a financial software program such as “Quicken.” The program will help you analyze your spending habits. If your impulsive buying is getting out of hand, you will need to understand what causes those purchases so that you will won’t cave into temptations. Do not be misled by sales and promotions. If something is on sale that you need, the sale is beneficial to you. Unfortunately, most sales convince you to buy stuff that you don’t need or food that you ordinarily don’t eat. Marketing and advertising ploys are so sophisticated that it’s easy to be led into emptying your wallet. Understanding the difference between “wants” and “needs” will help you pare down unnecessary purchases. A “need” is a necessity such as rent, whereas a “want” is something you desire for added comfort or entertainment such as a movie or new jewelry.

3. Organize Your Bills

Gather up all of your bills. Put them in spending categories, and list their due dates. If you have trouble remembering when to pay recurring bills, set up a bill-pay system with your financial software or your bank. Be sure to arrange your bills to arrive several days before they are due to avoid additional charges and fees.

4. Spending Categories

Develop your own categories for spending and saving. By organizing all of your spending and bills into categories, you can quickly view and plan your budget. If you are using financial software, be sure to customize the categories to suit your lifestyle. For example, if you have no children, you won’t need the “childcare” category. If you have a dog, add a pet care category instead. You can be as broad or specific as you like. It is easy to adjust your spending. You should adjust monthly spending allowances in specified categories when you need to cut back on expenses. Be realistic and flexible. Don’t forget to add a category for a savings account. You must have a balanced budget so that expenses never exceed income.

5. Seasonal Expenses

Seasonal activities and gift giving during the holidays ruins many budget plans. Set a cap on these expenses, and you will survive the holiday pressure. Be especially wary of marketing ploys during the holiday season that draw on emotional appeal. Remember, giving a gift doesn’t mean breaking the budget. Plan your festivities and celebration expenses as a category. Be sure to save some money throughout the year to enjoy those special events.

6. Pay Yourself

The cornerstone of a workable budget is to pay yourself first. Set money aside every pay period into a savings account. Life is uncertain. Having a chunk of money set aside will give you peace of mind, and bail you out of unexpected situations such as a job loss or a health emergency. Set extra money aside for something you would like to save for such as that new car or home. You must be steadfast to increase your savings. Don’t be tempted to dip into it.

7. Variable Expenses

Variable expenses such as a yearly bill or event that happens periodically needs to be placed into your budget. These bills or expenses are easy to overlook. Quarterly bills such as insurance or annual property tax are easy to forget when planning you budget. The account may look flush, but that money is spoken for by those expenses.

8. Savings Goals

Always have a plan for your money. If you are saving for something special, it will help you stay focused on a goal. It is much easier to cut back on spending if you have a reason and a payoff down the road.

9. A Living Budget

Make your budget a living budget. It is OK to rearrange your spending as time goes by. A rigid, inflexible budget is bound to fail because our lives and situations are constantly changing. If you blow the budget, it’s time to rearrange it to make it livable.

10. Reward Yourself

Reward yourself when you hang tough and stick with your budget. A proper budget should not be a painful process; however, a little reward is always something fun to anticipate.