Apr 24th

6 Steps To a Better Budget in Under 20 Minutes

BudgetMany of us recognize having a personal budget helps keep tabs on our money and stick to financial goals. But many fail to stick with a budget due to several problems, like: they can take too much time, become too complicated, or simply aren’t helpful.

Do you have problems with your budget? Here’s how to solve them and create a better budget in less than 20 minutes.

1. Start with a tested system
While creating your own custom budget might seem like the best approach, it could also be waste of time. A better idea: start with systems and templates others have already created.

Dave Ramsey has a great quick-start budget you can download for free. Or you can use free Google Docs templates to make a budget spreadsheet. Both options include common expenses so there’s no need to rack your brain to think of where your money goes.

Whatever budget you start with, feel free to customize the system as you’d like once you get a feel for what works best.

2. Look back on spending
If you’ve ever tried to guess your monthly spending, you’ve likely been surprised at how far off your estimates can be.

Spend some time digging up checking and credit card statements for the last month or two. Pull up bills you’ve paid, too. Tally up what you’ve spent in every category and use that to help build your budget going forward.

3. Assign every dollar
Set up your budget so income minus expenses equals zero, no more and no less.

This exercise helps in a few ways:

  • Makes sure you don’t go over budget. The point of budgeting is to spend less than you earn. Making sure your budgeted expenses don’t exceed income is a good first step.
  • You’ll feel like every dollar is already “spent.” By leaving nothing out of your budget, you don’t have to think about where any extra money goes.
  • Goals become expenses. You don’t actually spend money when transferring it to savings or retirement accounts. But including savings in your budget makes money goals feel mandatory rather than optional.

Keep in mind: no budget is going to be perfect on the first try. It’s likely you won’t stay within your budget in every category. That doesn’t mean you’ve failed. You may just need to adjust your budget.

4. Keep it simple
Super-detailed budgets may seem helpful for precisely track spending. But doing this can be overwhelming and the benefits might not be worth the added effort.

If trying to pinpoint spending in every tiny category turns you off to budgeting, use fewer categories. Don’t feel you have to fill in every box from the budgeting templates above.

Don’t be afraid to lump expenses like discretionary spending. Going to the movies, eating at restaurants, and enjoying a night at the bar all fall under one category: entertainment. If you’re not picky about how money is spent for entertainment, don’t bother separating them.

5. Build in irregular expenses
Irregular expenses like insurance, charitable donations, and vacations can ruin a budget. These likely aren’t consistent monthly expenses, and many of these add up to several hundred dollars when you have to pay for them.

Figure out the yearly costs of these items and divide the total by 12. Set aside money in a separate account monthly to pay for these things, and withdraw money from this account when bills are due.

6. Use rewards to stay motivated
Budgets shouldn’t be all about sacrifice, and staying on track can be a lot of work. It’s easy to stray from your budget, especially when you’re tempted to spend money just like your friends do.

Add extra incentives to meet your monthly budget. One strategy: let yourself splurge using budgeted money you didn’t spend. Reward yourself with a night out for all your hard work. You’ve earned it!

What are your major budgeting challenges? Do you have any tips for fixing them?

Jeffrey Trull is a freelance writer and blogger with a passion for helping others pay down debt, save money, and spend on what they love. His work has been featured on Money Talks News, MSN Money, and MainStreet. You can find him on Twitter.

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