You already know that the only way to launch a successful personal financial management plan is with a budget. The challenge is how to stick to your budget once you have written it.
Your Budget is Your Foundation
To recap, your budget is key to maintaining control of your money. First of all, you need to know how much is coming in and how much is going out. We’ve written previously about how to set up your budget. Your budget is the roadmap for your financial goals. For instance, if within this year, you want to take an executive course to improve your skills or get that promotion, your budget needs to reflect that expenditure. If you want to pay off your debt, your budget must reflect this goal as well.
Your budget should contain all of your savings goals, including your emergency fund and retirement. And, your budget needs to reflect all your expenditures, including the monthly recurring expenses, such as for your mobile phone, cable, memberships, subscriptions and utility bills.
Writing your budget can be a little tedious and perhaps you don’t even know where to begin. Fortunately, there is help. There is great budgeting software available, such as Quicken and several apps that can help you set up your budget by automatically pulling in your current income and expenses.
So let’s say you have mastered the task of preparing your budget. Do you ever look at it again? As they say, a plan that sits on the shelf remains just that…a plan. It never becomes reality. If you want to stick to your budget, you need to interact with it.
Here are 6 tips to help you stick to your budget.
#1 Set up Periodic Budget Review Times
Plug it into your Google calendar or whatever scheduling app you use. At least once a quarter, sit down with your budget to determine its accuracy. Are your income projections panning out? Did you have some unexpected expenses this quarter? Is this going to continue? If so, you need to adjust your budget. Reviewing your budget not only helps you stay on track with your priorities, but it makes fiscal management a routine part of your life.
#2 Minimize Impulse Spending
The quickest way to go off budget is by impulse spending. There was a study published recently that suggests that you can meet your weight loss goals by first writing down everything you are about to eat before you eat it. The idea is to make you think about what you are doing and decide if that bite is actually good for you. I think a similar strategy could help you stick with your budget.
Impulse shopping is the great saboteur of our financial goals. If we employ the above strategy, before you pay for your stuff, write down each item and the price and think about how it is going to impact your budget for that month. Can you afford it? Do you need it? Can you save for it and purchase it later? It’s a mindfulness strategy—putting conscious thought to what you are doing and the impact it will have on your budget and financial goals.
#3 Track Your Money
The best way to keep track of your money is to use financial apps, such as Mint or You Need a Budget. These apps connect to your bank account and will provide you with an accurate picture of your cash flow.
Apps do not keep track of your out-of-pocket expenses—you know, those coffees and other drinks and snacks that you pick up along the way. For this, you need a receipt-scanning app such as Zoho Expense or Expensify. Take and retain all of your receipts. Make time each week to scan them and then you will have an accurate total of your out-of-pocket expenses.
#4 Keep an Eye on Your Bank Accounts
Many consumers prefer not to know what is going on with their money. It’s too scary to look at the balance. However, avoidance will not help you stay on track with your budget. Aside from checking in to see the balances, staying informed about your account activities will help you catch any errors, fraud or other surprises. If you are still receiving paper statements in the mail, make a point to open and examine within a few days after it arrives. If you are like most people and you are using electronic banking, you can check your accounts anytime.
#5 Make Adjustments to Your Budget
Life is fluid and your financial life can change. Your budget should also be fluid. If your income increases or you receive a cash gift or tax refund, come up with a plan on how you will use that increase to invest in yourself. Perhaps you can adjust the budget to reflect higher payments to credit card debt, or pay down your student loan, or increase your monthly contribution to your emergency fund. On the other hand, if you have new expenses or debt, you also need to adjust your budget to reflect this reality. Will the expense continue? Will it increase? With the answers to these questions, you can make the best adjustments to your budget categories so that you stay on target with your annual financial goals.
#6 Automate Your Savings
One of the most challenging parts of your budget is meeting your savings goals. Once the money comes into your hands, you can usually think of many ways to use it. If you set up an automatic deposit from your checking account to your savings account, you won’t have to think about it. You will be free of temptations and you will be surprised to see that you don’t miss that money at all.