I am sure by now, most of us understand, that in order to get a grip on our finances and keep them in check, you need a budget. A budget is a key necessity to anyone in any situation, weather you are living pay check to pay check, have loads of debt or simply have no debt, it is essential that you know where your money is going. Having a budget is understanding how much money is coming in, where it goes and, planning to best allocate those funds. Creating a budget takes time, patience and most importantly, you have to be honest with your self and not cut corners.
Personally over the years I’ve had numerous budgets, always added some categories, subtracted others, but never could I get my budget to work for me. Finally about 6 months ago I created a budget that I am fully satisfied with, that actually works and is easy to follow. I am sure that there are a lot of people who are in the boat of “My Budget Does Not Work”. It’s not a bad thing, most people’s budgets don’t work for some reasons. Here are some reasons budgets don’t work:
No Plan to Save
I was guilt of this one many times. I never had a line on my budget where I allocated “X” amount towards savings. Despite the fact that I am fully aware of the idea “Pay your self first”. Previous budget I had, would work perfectly, cover all my bills, mortgage and all the expenses. Than I would have an “X” amount left over, which would be spent on whatever at the time, but a BIG FAT ZERO going towards savings. Than I wondered; “Why don’t I have anything saved or to show for?”. Well no wonder, I didn’t factor in the savings amount I plan to allocate on my budget. If you want to have something to show for at the end of the month (if your budget is monthly), than create a line on your budget called “Savings” and better yet, go to your bank and make the savings “automated”. You won’t have to worry about a think, it will all be done for you, just like your monthly car insurance amount. It’s fixed, they take it out and you don’t have to worry about it.
Cash is King
This is another one I failed to include on my previous budgets. I did not have a line on my budget for cash. Simply had no clue how much cash I was spending, where it was going and no plan in place. No wonder I was disappointed in my self and started to believe that budgets don’t work, because I had nothing to show for it at the end of the month. Just a big fat zero in savings. With that being said, you be smarter and create a line in your budget called “Cash” and allocate your self an amount.
Failure to Include Expenses
Don’t forget that not all expenses are monthly, some come every two months, others come quarterly and some annually. Keep in mind these expenses and factor them into your budget. Personally almost all of my expenses are monthly, so I don’t really have to worry, but I do keep a line on my budget for certain months called “Other Expenses” and you should keep a line open for that as well.
Not Enough Categories
Please look at your budget and tell me you don’t have a category “Spending Money” in it? I hope you don’t. Think about it, all the money in your budget is spending money. Don’t generalize your budget, but rather keep it simple. Think of your fixed expenses, account an “X” amount for your variable expenses, factor in your savings and that should be your budget, the long and short of it. Your budget, once prepared, should not take you more than 15 minutes to fill out, weather it’s monthly, weekly or bi-weekly. The more categories you have, the more harder your budget becomes to maintain and the more likely you will give up on it. Remember how I said earlier, over the years my budgets failed, well this was the biggest reason why.
This one is funny! A lot of people don’t actually know how much they make. How can you not know how much you make? Go look at your monthly bank account statement, see when your employer or you deposited money into it. Now I know, were not all the same. Some of us are paid weekly, most are bi-weekly and some are monthly. If your income varies from month to month, take the lowest month. It’s that simple!
Budgets are a personal thing. They do take a little bit of though, time and effort to complete one, but once you have the basics, it’s easy to add and subtract categories. Your spending categories and habits need to fit your needs and your individual situation. Don’t copy other budgets, but rather use it as an example, towards some categories you may have missed out on.
Budgets are not made just to track your costs. They are made for you to allocate your hard earned money WHERE YOU WANT TO. We all have different goals. Maybe you are getting out of debt or saving for a new home or planning a vacation, whatever your goal(s), a budget is a great way to work towards your goal and achieve it.