Budgeting: How To Be Realistic
by Carly Lance
Creating a budget is never an easy task. It seems like we always underestimate how often we go out in a given week. That $100 you budgeted for entertainment this month can go quickly if you like to have a few drinks or get your nails done every weekend. How can you do a better job being realistic with your budget?
Look At Previous Bank Statements
Take a lot at your bank statements over the last 60 days or so. Make a list of all the things that you spent money on. This will be your baseline for creating your budget. It is easier to create a budget that falls in line with your lifestyle if you actually know what that lifestyle is.
Find Practical Ways To Make Necessary Cuts
Say you spent $500 on food in the past two months. You know that you should aim to budget somewhere around that number. If you want to trim that budget, you can start looking at practical ways to do that. Perhaps you cut coupons to save 10 percent off your bill each month. Maybe you decide to only buy the cereal that you know you will eat on a regular basis. Small cuts to your budget can save you a tangible amount of money while not impacting your lifestyle too severely.
Don’t Cut Out The Discretionary Fund Altogether
There is nothing wrong with buying a pair of shoes every so often. The trick is to shop around for the best price on those shoes. Only purchase them if you will wear them more than once before they go into the back of the closet. Ask yourself if you should pay for it with cash or credit card. If you choose credit card, make sure that you can pay it off before the end of the month. Do not use your credit card as an excuse to spend more than you planned. Stick to cash if you have trouble controlling your spending when using plastic.
Revise Your Budget Every 90 Days
Plan to revisit your budget every three months or so to make sure it still works for you. If you have gotten a raise, you may be able to put more money toward your savings. If you have seen a decrease in pay, you may want to start looking to make more cuts. A medical emergency or job loss could change things in an instant. The cost of rent, utilities and other household bills goes up at least once a year if not more. Never assume your budget forecast can be accurate for more than 90 days.
Budgeting is typically an inexact science. You never really know how much you will need to spend each month to the exact dollar. A budget is meant to be a rough framework to help you make smart decisions with your money. Don’t just spend your paycheck as soon as you get it each week. Make a plan and stick to it as best as you can.
About the author
Carly Lance loves to blog about saving money and small business finances in hopes of helping others achieve financial bliss in their lives, such as her own.
Carly is also the blog manager for Personal Bankruptcy Canada, a company dedicated to helping “good people with bad debt” – even after bankruptcy.