Budget, budget, budget. It’s the magic word these days. It seems everyone is making one, balancing one or blowing one. If you’re preparing to make your budget, you’re probably eager to get started, but don’t let your early motivation fade and leave the job half-done like an overly ambitious home improvement project. Be prepared for some legwork before you can crunch out a budget and don’t get discouraged; perseverance will pay off quickly and the benefits compound in the long run.
Making the Mindset
Chances are you’re not making a budget just for the fun of it. You have a reason to take a good look at your financial habits and start making adjustments. The backbone of a budget is financial goals. Perhaps you’re trying to pay off debt, save for retirement, send your kids to college or someday travel the world. Whatever you want to do, you need a plan to get there financially. To set goals that are realistic yet challenging, make them specific and WRITE THEM DOWN. Writing them down forces you to clarify and elaborate more than the vague ideas you can keep in your mind and creates a sense of commitment. Assign priorities and break each long-term goal into manageable short-term mini-goals. Setting such milestones helps you mark progress on your financial journey and stay motivated to stick with your plan.
The most difficult part of making a budget is looking your habits in the eye, sometimes habits to which you deliberately turned a blind eye. Those who begin budgeting for the first time are often surprised by at least one category of their spending, and you have to be willing to make changes. If you have a partner, you should both be prepared to talk frankly and openly about your individual spending. If one partner denies, blames or makes excuses, the team effort will fail.
Rome wasn’t built in a day, and neither was Warren Buffet’s fortune. Preparing a budget is work; saving receipts, compiling data and figuring out where all the cash went is no cakewalk. Be patient and persistent, and it’s better to let a few dollars slip by than to give up in frustration trying to track every penny.
Make a Plan
Budget methods are like shoes; the right fit is comfortable, practical and makes you confident, and it will take time to find that right fit. Most budgets are set up on a monthly schedule since many expenses occur monthly, but you may want to coordinate your budget with your pay schedule so you know where your money goes right away and prevent it from being frittered away unconsciously. Those who want to put strict reins on their spending might prefer Dave Ramsey’s envelope system. Also, see our article about whether or not envelope budgeting works. Numerous types of budgeting software exists, free or requiring purchase. If you bank online you may be able to download statements to Excel or Quicken to make organizing simpler.
If you’re ready to get started, what are you waiting for? If not, what are you waiting for? Being prepared is a wonderful thing, but don’t get stuck in prep mode trying to perfect every detail before launch. Like riding a bike or running a marathon, the hardest step is getting started.