How to Create a Budget and Stick to it

Do you find yourself unable to put money away every month? Does the fear of an unexpected household or vehicle expense keep you awake at night? Are you sick of living life pay check to pay check? If you have answered ‘yes’ to any of these questions, you may want to consider where and how you are spending your money. Getting on the right track and maximizing your monthly income is easier than you may think. By creating a budget you will force yourself to make more responsible financial decisions, and be more successful in your efforts to become debt free.

It is so important for your financial health that a budget is created and maintained. Creating a budget does take some time and effort, but the results are so encouraging. It should take at the very least about a month to complete. However, to obtain a truly accurate portrayal of your spending habits it may take up to two months.

The first step in setting up a budget is documenting everything. A good suggestion for accomplishing this is to purchase a spiral notebook. Make sure it is small enough to fit inside a pocket or a purse. Each page of the notebook will be dedicated to a different component in building your budget. Suggestions on setting up your notebook are shown in the outline below.

1. In your notebook include:

•  1st Page: Your income for one month including date paid and actual take home pay.
• 2nd Page- As many as it takes: All of your expenses. (From the candy bar at the gas station, to monthly bills and savings account deposits).
• Subsequent Pages: Categorize expenses as the following;
  • Fixed Expenses- Expenses that do not change month to month like mortgage/rent, car payments, utilities, and insurance or credit card expenses.
  • Fluctuating Expenses- Expenses that do not stay the same each month like groceries, transportation/fuel, car repairs & upkeep, entertainment.
  • Yearly Expenses- Expenses that come up throughout the year but not on a monthly basis like tuition, car tune ups or veterinary expenses.

2. Evaluate:

• Add all of your month’s expenses together.
• Subtract your expenses from your monthly income.
• If your monthly expenses exceed your income decide which fluctuating expenses can be cut or decreased or, how you may be able to increase your income.

3. Calculate:

• Add all of your month’s expenses together.
• Divide your combined expenses by the number of pay checks you receive each month.
• The result is how much money you will need to set aside out of each pay check to meet your monthly responsibilities.

Once you know how much money needs to be used out of each pay check for monthly expenses, the key is to continue setting aside that money every month. There are several different ways to ensure that you stick to your budget. Listed below are just a few ideas.

1. Groceries:

• Take your list, coupons and calculator with you to the store and when you have reached your maximum amount budgeted for groceries, stop shopping or re-evaluate items already selected for purchase.
• Consider purchasing store brand products, they are very similar and much cheaper.
• Do not just buy a product because it is on sale or because you have a coupon, only buy it if it is on your list and you need it.
• Do not shop while you are hungry or while out with friends.
• Shop for an entire week or pay period in one trip.

2. Entertainment:

• Do not dine out and go to the movies all on the same night, enjoy each outing separately.
• Consider having cocktails and dessert at home before and after dinner.
• Be assertive when you are out with a big spender, suggest a sensible outing that everyone can afford.

3. Household & Monthly Expenses:

• Make arrangements with your creditors to catch up past due bills over time rather than all at once.
• Make a due date that is good for you! Most creditors will change your due date to allow you to make your payment on time.
• Get on a budget plan for your gas/electric. This way you will know how much is due each month.
• Use a timer when you are on the phone for a long distance phone call. When the timer goes off wrap up the call.
• Eliminate or down-grade unnecessary expenses such as Cable or Satellite television, caller I.D. and call waiting etc.

4. In General:

• Never take more cash than is needed at any given time. You will be less likely to over spend.
• Set a specific dollar amount on vacations, car expenditures and other large purchases.
• Understand exactly what you tend to splurge on, and constantly remind yourself of it.
• Learn to think about what you will have to trade off in order to make a purchase. Then weigh the importance of the purchase. Think about what you may have to give up later if you do make that purchase.
• Create a set of financial goals and carry them with you at all times so that you have a constant reminder of what is truly important.
• Ask someone that you trust to try to keep you on track, and remind you of how important your financial choices will be.
• Consider a Debt Management Program if your expenses are out of control. (Consumer Credit Counseling Services in Rochester can offer this service to you).

Remember that your financial health and well being depend on you and you alone. Taking the time and putting in the effort can make your financial life so much easier. When you are creating your budget try not to think of it as a punishment or a huge decrease in expenses. Think of it instead as a systematic creation to maximize your monthly income and achieving all of your financial goals. Find yourself capable of putting away the money you always wanted to each month. Don’t have another sleepless night; know for certain that if an unexpected expense presents itself, you can cover it. Don’t live pay check to pay check anymore, create a budget based on your income and living expenses. You can be financially healthy! It just takes a careful evaluation of your current spending habits, and a conscious effort in careful budgeting.

Article Written by: Christina Jensen