How to make a budget and stick to it
I’ve written about budget planning a few times on the blog now.
I’ve been budget planning for years and in that time have had a decent amount of success with it. Today I won’t be talking about the setting up of the budget itself. If you want to see how I budget plan, here’s a full break down of how I do it. Instead, this post will be centered around my best tips for creating a budget that you can stick to.
1. Be honest with yourself.
The first step in creating a budget is reviewing where your money goes each month. It’s up to you how you categorise it, but I like to break everything down into four areas:
- Etsy (as in, shop related expenditure)
- Other (basically everything else)
When you first do this, it might help you break things down further, to really understand where you’re spending your money and how you may be able to reduce your spending. For instance, doing this exercise you may find you spend way more on eating out than you ever thought (this was a big realisation for me when I started budget planning).
So where does the honesty come in? The honesty comes in when it comes to reviewing the expenditure list. Do you really need that morning coffee every day? Do you need ten different eyeshadow palettes? Once you’ve had that conversation with yourself, you can…
2. Set a realistic budget.
Your reasons for needing a budget may differ. You may have a specific goal – a holiday, paying off your student loan. Or, it may be a necessity due to mounting debt or a change in circumstances. No matter the reason, make sure you don’t set yourself up to fail.
It can be easy to get carried away when you first start budget planning to think you can suddenly save a bucket load of money each month. To think that you can suddenly cut your discretionary spend in half. If you go to extremes you’ll just fail and be less likely to want to try budget planning again.
Set yourself reasonable budgets that are in line with your goals. It’s easier to progressively increase the amount you save each month, as your spending habits improve, than it is to go straight to ‘I must save 25% of my income every month.’
3. Log every penny!
The biggest turning point for me was logging everything I spend in my planner. There’s nothing more sobering than looking at a spending log and seeing how many times a restaurant or coffee shop appears in the list. Having the daily accountability of having to write down every single thing you spend really helps you evaluate whether you need to make that purchase.
4. Don’t wait until the end of the month to see how you’ve done.
When I set my budget for the month, I also work out how much that equates to each week. Then, at the end of the week I tot up how I’m doing against that weekly goal. This helps me amend my spend the following week according to how well I’ve done so far.
I’m much more likely to hit my monthly budget if I’ve kept an eye on it throughout the month.
5. Remember that things sometimes crop up.
Don’t forget about ad hoc expenses sometimes happen. That yearly insurance renewal, hairdressers appointment, a car repair. It’s up to you how you manage it, just don’t let something like this crop up and derail your budget. You might wish to set aside an amount each month to save up for things like this, or have a savings account that you know you can dip into if needed.
In my planning life, budget planning is the one thing I feel like I’ve really nailed.
I’ve been budget planning in the same way for years, it very rarely changes. Hopefully some of the above tips help you in your planning journey. How do you budget plan? Let me know in the comments!