Before You Budget

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.

Changing Habits

what to do before you start budgetingThe 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.

Have Patience

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.

{ 3 comments… add one }
  • LoveSanta November 1, 2012, 7:44 pm

    I agree that mindset is an important part of succeeding (in budgeting or anything else really) – when stuff gets hard, it is easier to perservere if know why you’re doing it, know what your end goal is.

    Making a lunch every morning before work can get tedious but if you rememebr it will results in a 4 star hotel holiday instead of a hostel holiday, making a sandwich is an easy task.

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  • Happyflowerlady June 30, 2013, 1:07 am

    Even when I understood the necessity of having a budget, it has always been really hard to stick to it.
    It is kind of like going on a diet with your money, if you take away everything good, then pretty soon you have a difficult time focusing on why you are doing it.
    Now, I am living a very frugal lifestyle with my SS retirement pension, so budgeting is not an option, it is an integral part of my existence.
    One of the things that I try to do, is cut the corners that don’t matter a lot, so when something comes along that is important to me, I can splurge just a little. That way, I do not feel totally deprived like I would if I had to give up the really special things.

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  • professionaltightwad June 30, 2013, 7:00 pm

    Having a clear, detailed reason you are budgeting will help with the mindset. Knowing the outcome helps avoid the ‘deprivation’ mindset that most people get when thinking about a budget. All a budget means, at its heart, is to take control of your money – and that should be a good thing.

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