There are many reasons why the mention of the word ‘budget’ sends people into a cold sweat, but budgets by themselves are not the enemy. If you’re having trouble sticking to your budget and your financial goals are wobbling a little off track, you might be interested in these tips for setting a realistic budget and sticking to it. You can also find more information on this subject online, via debt counselling websites and agencies.
Know Where You’re At
In order to set yourself a realistic budget, you need a clear picture of where you currently stand financially. There are organisations to help you with this, but whether you get help or not, you will still need to ask yourself the same questions: how much are you bringing in? How much is flowing out? Where is it all going? If you have more money going out than in, you will need to plug some holes – and you may have to face the fact that there will be some debt to deal with.
Know Where Your Money Goes
Keep a spending log for at least one pay cycle. If you really don’t know where all your money is going, this is the best way to find out. Ideally, keep it up for at least a month, as most bills come in at least monthly. Work out what spending is essential, and what is discretionary. When you’re working out your expenses, remember to include a monthly stipend for quarterly or annual bills like insurance and council rates. It’s easy to forget these when you’re only tracking for a month, but for a clear understanding of what’s going on you need to include all your costs.
Setting Real Savings Goals
No one is going to stick to a budget that puts everything out of reach. When setting your savings goals, your aim is to create momentum, so make sure you create goals that are realistic, and achievable within a reasonable timeframe. If you’re looking to save a deposit for your own home for example, it wouldn’t work to aim for that to happen in a six month timeframe. However, you can set yourself a goal to save a certain amount towards your home deposit each month – and this will build your sense of achievement and momentum as you see your dream coming closer and closer each month.
Total Denial Doesn’t Work
Some people think if they deny themselves everything, they’ll achieve their savings goals faster. In fact, this rarely works because they become so jaded at the lack of any outlet for fun or pleasure that they tend to ‘cheat’ on their austerity savings plan – and then their savings has their own version of a financial crisis. You need to be realistic about giving yourself some level of reward. Set a target – and a limit – for every savings milestone on your way toward your big savings goal. Small, inexpensive things you can do to celebrate your wins. This will also help you build momentum.
A budget is a moving feast and you need to keep track of how you’re doing. This is how you’ll know if you’re entitled to any rewards, and also how you attain your sense of achievement and momentum. Most people who make their budgets work check in with their goals and targets at least once a month.
Self discipline is of course essential if you’re going to make your budget work for you – but you also need to set a budget that is achievable and realistic. Without this in play, you will become dissatisfied and start to chip away at your savings.