You finally committed to making a household budget, listing your monthly expenses and revenue streams. However, at the end of each month you find that you've overspent on going to the movies, eating out or buying clothes.
Sticking to a budget can be tough, but here's the good news: You can do it! You simply have to identify the most common foundational building blocks of budgeting and plan accordingly.
Here are the most common tips to help you craft a budget:
1. Be realistic: When we sit down to make a budget, we too often do so with unrealistic hopes. We plan to spend just $50 a month on eating out, or we promise that we'll only spend $400 a month at the grocery store. Then when the end of the month comes we discover that we spent $100 on pizza alone. At the grocery store, we ended up spending $700. Be realistic about your spending habits. If you like nothing more than catching a first-run movie on the weekend, factor in cost of tickets, snacks, and drinks, not just the cost of the tickets alone.
2. Plan for emergencies: Things go wrong. Maybe your washing machine goes on the fritz. Maybe your dishwasher springs a leak. Maybe your dog needs an emergency visit to the vet. These emergencies require money, usually enough to break your monthly budget if you do not plan for them. Put aside a set amount of money each month for emergencies. If you do not need to spend that money, great! However, you can bet that the following month, something will come up.
3. Remember special occasions: Each month, it seems, features at least one birthday, holiday, or anniversary. Buying presents and cards can eat into your monthly budget. Make sure to include a line item in your budget for these special events.
4. Practice makes perfect. When you reach the end of another month and find that you may have gone over budget, keep at it. Try again next month. Think of it this way: Yes, you overspent last month. However, if you did not have a budget in place, how much more might you have spent?
5. Redirect funds for long term benefit: It is easy to want to splurge if you receive an extra-large commission check or an unexpected bonus. However, be careful. It is easy to spend all that money on entertainment, gifts or high-end electronics. Instead, put that money to an even better use. Pay down debt, put it into savings, or put it towards the emergency fund.