3 Simple Steps To Scrubbing Your Budget

Staying on budget is not easy.

It can be very difficult to stay committed to a bunch of numbers on a piece of paper or spreadsheet, but budgets are actually quite helpful. They are a snapshot of your financial situation at a given time, a road map that tells your money where to go.

Budgets shouldn’t feel super restrictive — like a diet that takes away all the foods you love with any taste. Deprivation always leads to overindulgence, so don’t take away everything you enjoy. Give yourself some leeway. Restrictive budgets are the fastest way to blow a budget. Here are 3 steps you can take to set a budget and make it much more realistic.

Step 1: Write it out

Start by writing your saving goals, then listing your monthly expenses and lastly anticipating how much you’ll need for spending money. Yes, I said spending money. If you like to buy coffee at the breakfast cart every morning there needs to be a line item in your spending money; if you are a smoker, your cigarette habit should be there as well. Addicted to shoes? Add a line item for how much you think you’ll spend per month on shopping.

The goal is to account for every possible place your money could potentially go.

Step 2: Review Actual Spending

Now this is where things get interesting. To see if the new budget you created is realistic you will need to assess your previous spending patterns. Download your bank statements for the last three months and go through them in detail. Assign each spend to a budget category and add it up. Did you spend close to what you think your coffee budget is or did you spend more? Are there items you spent on repeatedly that don’t have a line item in your budget? Maybe it should.

Step 3: Make Adjustments and Trade-offs

Now that you have what you think you spend and what you actually spent side by side, it’s time to make some adjustments and trade-offs. Were you shocked by any of the actual spending numbers, like your monthly coffee or shoe spend?  Consider giving yourself an allowance for that line item in cash so you don’t go over.

Are there items that you missed completely? What are you willing to reduce to accommodate for that addition to your budget?

Following these 3 steps will help you get your finances in order, while also giving you space to live. Would you be more willing to stick to a budget that accommodates for lifestyle?

Let us know in the comments below.