Creating a spending plan or budget and then sticking to it can be quite difficult. Even if it works on paper, for many it does not work well in practice and many people try and fail at budgeting.
And 38% of the population does not even try to create a spending plan.
You can create a spending plan that works for you and your family. Below are a few tips to help you create a better more effective spending plan.
Time is your Friend – Whenever you are working with a spending plan, you can choose to look at it daily, weekly, monthly, or within some other time constraint. I recommend weekly, or monthly depending on when you get paid.
Reserve a specific time to sit down with your spending plan before you get paid and stick to that time.
For example, Sunday after church or Wednesday after work.
Use this time to get very familiar with your spending plan and expenses, and record when money goes out and when money comes in. This time you spend working your money will get shorter the more you work it, but the key is to be consistent.
Set realistic spending limits – One reason why budgets fail is that there is not a realistic spending limit. For example, you get ready to budget and plan to spend $400 this month on groceries. Three weeks into the month, you realize you spent $420 with another week to go.
Some people will get frustrated and quit after they realize they went over their plan limit.
It’s not the budget that is at fault it’s your unrealistic spending limit. If you spent $500 on groceries last month, you are probably going to spend around $500 this month. Be realistic with the limits you put on your spending.
Be Ready to Make Adjustments – Keep in mind that a spending plan is an estimate or plan of how you will spend or expend your money and plans change.
Be open and flexible to changes in the plan.
When circumstances change such as when you get married or have a child or change jobs, your spending plan is going to need to change. New spending categories and saving for college for the kids or retirement is going to possibly require changes to the plan.
What are your tips for an effective spending plan? How do you manage your spending plan? Subscribe to the GoldenRules Blog and learn how to create a winning spending plan for you and your family.