Creating a budget can seem like a daunting task. Actually staying on budget can be even more difficult. It doesn't matter if you're a budgeting beginner or veteran saver, sometimes we all stumble.
It took us years to perfect our budgeting strategy. We suffered through months of busted budgets, sucktacular savings, and money that just went missing. Now that we've greased the wheels and added a few tricks to our budgeting bag, our monthly budget runs like a well-oiled machine… most of the time.
Whether you're using a zero-sum budget, a traditional spreadsheet, or simply placing money into envelopes, it's easy to get discouraged if things don't go exactly as planned. Don't give up! These few simple tips will help keep your head up and your crush your budget.
Overestimate Your Expenses
When creating your monthly budget, you're bound to have oodles of fixed expenses. For example, your car and house payments probably stay the same each month. However, some expenses are variable, so you'll have to estimate what they could be.
My strategy is to always overestimate my variable expenses. That way, I'm covered if a particular bill happens to be higher than expected that month. (This tends to happen with my utility bills.) Also, overestimating can help make up the difference for any other expenses that may have gone over their allotted amount.
Have an Emergency Fund
In my opinion, having an emergency fund is absolutely crucial to staying on budget. Let's say that your water heater dies and you have to replace it right away. Of course, you didn't budget for this to happen since it was totally unexpected. Without an emergency fund, you're forced to go off budget and ruin your financial plan for the month.
With an emergency fund, you simply use that money to buy a new water heater and stay on budget. Then, for the next few months, you simply set aside additional money (in your budget of course) to replace the funds that were used for your new water heater.
I believe you should start with a $1,000 emergency fund until you are out of debt. Then, shoot for at least 3-6 months of take home pay once you are debt free.
Update Your Budget Often
One big mistake I used to make was trying to "set it and forget it." I'd finish our monthly budget, then never check back in with it. That meant I had no idea where we stood throughout the month.
Cross-checking my spending with our budget has made a huge difference. Now, I usually check our budget a few times a month to ensure we're not overspending in any given category. For instance, we allocate $500 per month for groceries. Sometimes, I am shocked to see that we've spent way less than we planned.
Other times, we're left eating toast and freezer pizzas for the rest of month. Either way, it's important to see what you have spent and what you have left to spend at any given moment. It won't take very much time, but it will certainly be time well spent.
Make Sure to Budget for Fun
When we first started budgeting, I have to admit that I went a little crazy with it. I never used to budget for fun evenings out, hiring a babysitter, or entertainment. Over time, I've realized that budgeting for these things makes it much easier to stay on track.
If you're in the debt repayment stage, then you may not be able to set aside a lot of "fun" money - at least for awhile. That is OK. Once you get to a better financial place, you can consider putting some spending money aside to do things that you want to do. Now that we are debt-free (besides our mortgage), I'm much more flexible with our monthly budget and always set aside some funds just for "wants."
Remember the "Big Picture"
If you get off track and spend more than you should have, don't get discouraged. Try to remember the big picture. Letting one month go to hell doesn't mean "it's all over" or that budgets don't work. Figure out what went wrong, and start over the next day with a new resolve to stay on course.
Life happens. Things break. Kids have to go to the doctor. Don't let a slight detour take you completely off course.
Budget busters are everywhere, and it can be discouraging to get off track. But, like anything else, budgeting takes practice and little work to do it well. By actively monitoring your funds and preparing for an eventual emergency, you'll be in great shape to stick to your budget and roll with the punches.
When staying on budget gets tough, remember to stick with it. You can do this! Budgeting works and it can change your financial life forever.
The writer is a freelancer