When you hear or read the word budget, what do you think? I think for most of us, we think about being restricted – a negative connotation. That is why I like to use or call it a spending plan because, in budgeting, you are planning to spend your money.
Spending plans are a funny animal; you may not get them right the first time. And just when you think you got it about right, some life situation or circumstance changes, and the spending plan must be adjusted.
When you think about it, a spending plan is just an estimate or plan of how you are going to spend your money, and you must and need to be prepared to change it when needed. Two interesting things about estimates:
- Estimates change – Estimates change based on circumstances. For example, let’s say you had an emergency that you did not budget for, maybe your AC went out, and you will now have to change your budget.
- Estimates can be better – You can have good estimates, and then you can have a better estimate.
For example, let’s say you estimate that you will spend three hundred dollars at the grocery this month. And three weeks into the month, you realize that you have spent four hundred dollars on groceries. The estimate was probably not that good. On the other hand, let’s say that you tracked your grocery spending for three average months, and it looked something like this:
Month one $300
Month two $400
Month three $350
$1050.00 / 3= $350.00 grocery estimate
Now you have three months of grocery spending history that you can average together, $350 per month, and now have a better spending estimate for your groceries for the next average month.
Now, just because you have a better estimate does not mean that it still will not have to be changed at some time because a situation comes up or a circumstance change. However, what you do have is a better opportunity to stick to a spending plan estimate because it is a better estimate built on past spending history.
It is the tracking of spending that allows for you to have a better spending plan estimate.
So how do you go about tracking your spending?
Get into the habit of consistently recording your expenses in some way.
The most important thing is to use some type of log to record the expense. Whatever it is that you use, a log, a piece of paper, some type of register, or a spreadsheet, every time you spend money, you should record it in the log.
Tracking your spending helps to make your money, and you’re spending more real. You will begin to see your money as a tool to help you achieve your goals and that will give you a sense of control over your money.
Your awareness of your money and your behavior with money is sharpened, allowing you to make changes to improve your financial situation. So now, instead of thinking of a budget as a restriction, think of it as an estimate of how you will spend your money for the next period, week, biweekly, monthly. And the better your spending estimate, the better your budget, and hopefully, you will be more likely to stick to it. What other tips can you think of to help stick to a spending plan? Comment below and let us know.