Wednesday, 11 January 2012

Reboot Your Budget

2012 and the New Year’s Resolutions are two weeks old. So how are you doing? Did you make a commitment to finally make and follow a budget? If you did, you are not alone. Budgets seem to be easy to make, but really hard to follow. If this sounds familiar, here are a few pointers that may help you stick to your budget.

When you think of budgeting and making a budget, first take a moment to reflect on your values. Money is just a resource and using this resource should be a reflection of what you value. I’ve always thought that if you want to see what people value, look at how and where they spend their money. A budget should allow you to express what you value and help you from running out of money by planning out your known expenses.

Do you know where your money is going? To make a realistic budget, first track where you spend every penny, --yes every penny, for two months. At the end of the first month, review where you spent your money. Keep going for another month to catch all of your expenses and income. There are software packages like Quicken or www.mint.com to help you track your expenses. It doesn’t take a smart phone or expensive software. You can track your spending with a little notebook that you keep with you 24/7. If you want control over your weight, write down everything you eat. If you want control over your money, write down where you spend every penny!

Now that you have two months of spending, categorize your spending and estimate your expenses, spending, savings and investing for the rest of the year. Don’t forget the non-routine expenses, such as vacation, birthdays, anniversaries, holidays, etc. Make sure your budget reflects your values.

To help you stick to your budget, go with one of the oldest budgeting techniques. Use cash and envelopes. Write the category on the outside of an envelope and when you get paid, put cash into the envelope. When you go grocery shopping, take your “grocery” envelop. When you go out to eat, take your “dining out” envelop. Yes, using cash is old fashion, but it works.

If you share expenses with someone else, get that person involved in your budget. Create the budget together and have weekly budget meetings. Make sure you agree that your budget reflects your values and that you both agree to the budget. Keep the conversation focused on the budget and not on past spending. Keep the conversation positive and keep working on a common goal.

This is a real quick overview on budgeting. Let me know if it works, what questions you have and ideas for blogs that will help you succeed in your personal financial goals.

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