How to Stay to a Budget
Staying within a budget is often more difficult than writing one. A budget needs to be set up in a way that provides discipline but is still realistic enough that you will follow it. Knowing how you spend and keeping track of where your money goes will give you an accurate picture of what spending habits might need changing and what financial burdens you just may have to live with. This information and your own discipline will get you on your way to financial stability.
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Instructions
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Write a budget that is realistic. If you create a budget plan that is not in line with the reality of your expenses and lifestyle, you are likely to get off track. Keep a tally of your expenses for a full month and use that data to create a budget that mirrors how you live. This exercise will also give you the opportunity to identify areas of high expenditure that need changing; for example, if you spend a lot of money on eating out, you may wish to immediately reduce the amount of money for that purpose available to you in your budget.
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Track all of your expenses in a spreadsheet program. Every expense should be listed, regardless of how it is paid for. For example, list every credit card transaction with the date, amount and details of the transaction. If you use $40 cash for a combination of a T-shirt purchase, quick meal and subway ticket, you should track each expense individually. Don't forget to include hidden expenses such as bank fees, which drain money from your account even if you are not aware of it.
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Assign a budget category to each of your expenses and use the spreadsheet program to keep a running total of your expenses compared to the amount permitted by your budget for each category. As you near the limit for each category, curtail your spending. If you find you are over the budget for what you perceived to be a fixed expense, such as your cellphone, review your bills or contact the company involved to find out why.
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Take action to reduce over-expenditures in fixed expense categories. If the issue is with your cellphone, for example, reduce your long-distance usage or sign up with a cheaper plan. If you cannot reduce the expense, budget more for it and remove the over-expenditure from another budget category.
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Contribute to savings, retirement or investment plans through automatic withdrawal from your bank account. This method will help ensure that you do put aside the amount you have budgeted to save every month. If you rely on yourself to manually complete the transaction, you may be tempted to put aside less than you'd planned in order to have more money available for discretionary spending.
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Set an amount for miscellaneous spending and keep the amount in cash in a safe place. This idea comes from the theory of envelope budgeting, where the funds needed for every budget expense are kept in a separate envelope. When the funds in the envelope run out, the miscellaneous spending should stop. Continue to track the details of your purchases from this pool of money, however, to determine where that money goes and whether any budget categories should change.
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References
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