Budgeting is something many people choose to ignore altogether. No one wants to spend their weekend budgeting. But the scarier truth to digest is that some will create a budget simply just to have the appearance that they have their finances, and life in order.
And this is the stinger…
Just because you “created” a budget it does not mean that it will actually work. Or even make sense to you for that matter. And what good is a budget you can’t even make sense of? Chances are you won’t ever use it if this is the case.
Speaking frankly here, you would be surprised to know how many people “make”, “create” or “start” a budget just for the quick gratification and satisfying feeling of having something written down.
I know this to be true because I personally did this.
It really didn’t matter to me at all if the budgeting template I happened to be using actually applied to me. Or if the template would even work for me. It also didn’t matter to me in the slightest it the numbers were “REAL”.
For me, the idea of having a budget to live by far out weighted the reality.
Which was why I had a “budget” that did diddly squat for me. And a large part was because I was using ideal or fairytale numbers to create it.
So don’t repeat what I did.
Before you start creating your budget you should answer the below 6 questions first. I am not asking you to do this just because I KNOW it will help you when creating your budget. Instead, I want you to answer these questions for the benefit that they will help you stick to your new budget. Use the questions below to motivate you and to light some fire that you are determined.
So here they are, the 6 critical questions you should answer and evaluate before starting the process of creating a budget.
What Are My Priorities
This is going to be very specific to each person so I will just list a few possible ideas:
- Is it traveling?
- Focusing on school?
- Starting a family?
By knowing what types of things are your personal prioriteies you will be able to set goals and start creating plans for the future so you can spend or save accordingly. This priority will also help you when it comes time to create financial goals to help guide your budget.
What Are My Goals?
I can’t tell you what to do with your money just like you can’t tell me what to do with mine.
Black and white your money is your money to do with what you will. As long as your monthly expenses are paid and you have a higher income than what your expenses are you are on the right track and have a great starting point. However, don’t leave it at that.
Switch your thinking to long-term opposed to short-term. A budget isn’t something that should just come into your life one month and be out the window the next, and only come back as “Needed”.
After all the point and job of a budget is to help you keep your finances on track, and to reach your personal finance goals. If you aren’t consistent your budget will ultimately do you no long-term good.
Don’t have the goal your budget could help you reach?
Set one! Think hard about it, don’t make a snap decision.
Remember your budget should be realistic and attainable. Keep your goals simple. Don’t set a big goal right out of the gate when starting a budget, it will only overwhelm and discourage you.
Something that has helped me reach certain goals, is creating baby steps that lead to my bigger savings goal.
What Are My Non-Negotiable Monthly Expenses
This can be a very hard yet telling part when it comes to budgeting. It can also be an incredibly humbling experience because some of those expenses you feel are a must, simply are not!
So take a good hard look at which of your expenses are a “MUST” to pay each month. These include anything you owe. Such as loan payments, credit card minimum payments, mortgage/rent, insurance, phone bill, internet, etc. These are your fixed expenses.
Take a minute, ponder over those expenses.
Then, grab your pen and paper and estimate what your variable expenses are too. Variable expenses oftentimes include your grocery bill, fuel, utilities, and other things like that.
In case you are wondering what exactly variable expenses are, they are they expense you pay every month but they vary and can go up or down month to month.
So once they are added up you know that the number from your variable expenses and your fixed expenses combined are your monthly obligation.
There you have it those are the non-negotiable expenses you are required to pay monthly.
Having this number is the key to creating a budget. After misusing that number from your total income, you easily have what you have leftover to save or use.
Do You Plan On Reviewing/Revamping Your Budget? How Often?
We can be as diligent as we want but life is messy and things can get in the way changing circumstances in the blink of an eye. Or sometimes we have planned changes.
Some example of change:
- income increase
- income decrease
- job loss
- increased medical expense
- a new baby
- rent increase
- a child moves out
So you see expenses can vary quickly and sometimes suddenly, this is when your budget needs to be reviewed and most likely changed a bit. You need to give yourself that flexibility and not have your budget written in stone.
Don’t make it a habit to alter your budget regular unless your circumstances give you a reason to make changes.
Just know your budget can be changed and as you reach goals, and set new priorities your budget will inevitably change with you.
Is Your Spouse On Board?
If you have a spouse then there is no doubt they will have to be on board in order for your household budget to work.
A budget only one person is following is ultimately a failed budget. There is no possible way for your budget to survive if you are living in a split home.
I personally struggled with this one, my husband hated the word budget even and did not even want to talk about it. This made things extremely hard.
However, I found the more I was able to talk to him about it the softer he became to the idea. SO communicate with your spouse it is truly the key to getting on the same page financially.
Don’t know where to start?
That’s okay start by explaining the situation, help them come to understand why having a budget is important, and how it can improve your finances. Ask them for their support and help to make the budget work.
You can’t expect anyone to just do something because you told them to, you need to explain, and help them understand the goal and purpose the way you do.
What’s The Plan If Your Budget Fails?
Recognize that the first couple of budgets you create will most likely fail. You aren’t alone though this is the case for the majority of people.
If your budget fails you one month, make a mental note and learn from the failure. Make sure to get right back on track as soon as possible. Don’t treat it as an excuse to give up, and most importantly don’t lose sight of your goal because of a setback.
I don’t have to tell you that living with a budget is work. Remember often times when something requires work there will be highs and lows. Focus on the wins. Celebrate that you have had many more highs than lows, budgeting is a journey so stay on the ride. Just dust yourself off when you fall. Realize tomorrow is a new day to get back on track.
How Will I Keep Myself Accountable?
This can be a very tricky question to answer, because if you have never budgeted before how will you know what will keep you on track?
So think about that.
For me, my goal is building a house. So to keep myself accountable I regularly remind myself of my goal.
There are many other ways to keep yourself in complete control of your budget. Some of them are by using Mint or PocketGaurd. They are both apps for your smartphone to make sure your budget is always accessible to you. Or if you prefer the paper method you can download my budgeting binder I have created exclusively for Sensible FUNancials readers!