10 Simple steps to creating and sticking to a budget

      1.Understanding the Necessity of a Budget

Even the most savvy of spenders need a budget. Keeping on top of your bank account to avoid overdraft fees does not count as a “budget”. Even if you are able to spend your money wisely and keep all of your bills in check, a budget is the necessary first step to establishing a long-term savings plan for those rainy days of even more importantly, retirement.

As technology improves, humans are living longer than any other time in history! Realistically this means you’ll need to have more money saved up before you’re able to retire because you can expect the possibility of living about 40 years in retirement! This means you need to save possibly a million dollars to cover inflation and the rising cost of living. Saving for retirement is so important.

      2.Answer the Three Most Important Budget Questions

                     I.How are you spending your money now?

It’s time to take a realistic look at how and where you are spending your money. Pick apart your bank and credit card statements to see just where your money goes.

                    II.What are your long-term financial goals?

Sketch out your personal idea of the lifestyle you want and your future goals. Do you want to send your children to Ivy League schools? Would you like to take a yearlong cruise around the world when you’re 65? Do you want to pay off your home by the time you’re 40? These types of things just don’t happen by themselves, you need to take the necessary steps to make these things happen.

                    III.How will you keep track of how you are spending your money?

Evaluate the best way you will realistically keep track of your spending; good old pencil and paper, an excel spreadsheet or financial software.

       3.Try out some personal finance software

There are plenty of great software programs available that are great at helping you keep track of your spending and how your money is spent. Programs such as QuickBooks and others like it, you can link your online banking accounts to the various websites of your credit card companies, mortgage companies etc to paint a complete picture of your spending and income. Software makes budgeting extremely simple by doing all the painstaking legwork for you so all you need to worry about is sticking to your plan.

      4.Set your limits

It is important to stay on top of your spending right off the bat, but once you get the hang of it don’t drive yourself nuts with it. It is very important to stay diligent on your spending plans but don’t become an overzealous budget dictator.

       5.Watch your cash

Cash is harder to keep track of as far as your spending. With the fairly universal acceptance of debit cards try using your debit card whenever possible. This will help you keep track most accurately how and where your money is spent.

       6.Avoid using credit cards

Ugh credit cards. These seemingly friendly pieces of plastic in your wallet are a budgets worst enemy. Credit cards are the easiest way to stray from your budget by allowing for overspending as well as creating a variable bill each month. Try sticking to your debit cards and cash for the first few months to be sure your budget is realistic. If you find yourself using your credit card it is time to re-evaluate your budget and your commitment.

       7.Define Needs versus Wants

Sitting down and going through your bank and credit card statements should offer a pretty good insight into what is truly a need versus a want. If things are tight you may want to consider dumping cable or your home phone line if you have a cell phone. Refusing to use your credit cards will also help you understand exactly how much money you really have and the types of things you truly do need.

       8.Pay yourself first

Again, savings is so important. If you have direct deposit available at your work be sure to have it. Set up a savings account and have at least 10% of each and every paycheck auto-deposited to your savings account. You need to pay yourself first before you spend your funds on something you really don’t need.

       9.Don’t count your money before you get it

Planning on a big tax refund this summer or that rich uncle leaving you millions for your retirement is a common mistake. We never know what life may bring us. Counting on money before we have it can really set you behind in the future if it doesn’t come through. Forget about that big payout until it’s in your hands; you never know what life may throw at you.

       10.Follow through

Setting up a brilliant budget and sticking to it for a couple months until you have one rough month and then plan to, “I swear”, stick to it and make up for the bad month, next month. Just don’t do it. This all goes back to setting up a realistic budget. Create something you will stick to and set up the system to be sure it works!