How to Make a Budget, and Lesser-Known Ways to Stick with It

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If you can envision each month by the characteristics that define them, January would be the buttoned-down do-gooder following December's festival of debauchery.

January is the time when we all set our mind, body, and household back in order -- or at least we have every good intention of doing so.

Making the decision along these lines for something sensible, like a personal budget, is the easy part. It doesn't take that much effort to open yourself up to some financial limitations. The tough part comes in phase two ("the doing") and phase three ("the maintaining").

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Let's begin before actually doing the budget.

Put yourself in the right mind-set about what it means to live on a budget. Let's compare budgeting to the ever-popular resolution of getting in shape. To succeed at the latter, you can't overreach realistic levels of exercise because you'll be less likely to achieve your goals. The folks who fall into this trap only end up associating each fitness routine -- or budget, in our case -- with unpleasantness. Looking at a budget as a loathsome experience dooms it before it begins.

Don't automatically assume having a budget will destroy your lifestyle as you've known it. Everyone lives by some form of budgeting. A well-crafted one doesn't have to end your fun.

As a first step in overcoming this, let's strike the word "budget" in favor of, say, "financial plan." This plan will allow you to set priorities with your money and put control into your hands.

If you're wavering about diving fully into this finance plan, just remember these big-picture benefits:

  • Prevents you from living paycheck to paycheck.
  • Prevents debt.
  • Reduces stress.
  • Encourages saving for the future.

Assembling the working parts
Before you assemble said financial plan, you need to know all the working parts. You should do this over a two- to three-week period by writing down everything you buy, the cost, and whether the purchase can be categorized a necessity or luxury. You should also take full stock, and we do mean full, of all your bills.

You are doing this right if the list goes way beyond the monthly utilities to include transportation, food, entertainment, insurance, and other sporadic, yet consistent, debt dues. If you are a city dweller, you might be wise to set aside a fund for parking citations. If you're a parent, costs for birthday parties and other special occasions should also be rolled in.

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A key ingredient is to also factor in unexpected events or emergencies, such as car repair or visit from the plumber that could otherwise blow up the best-laid plans. The proper way to do this is to invest in regular maintenance on items at the heart of these unexpected events to prevent the unexpected in the first place.

The key to this exercise is to accurately capture every bit of your spending so that you can attribute a monthly figure to each item. Be realistic and honest to determine real spending patterns.

Now that you've determined what your regular expenses are, you'll need another dose of harsh reality to review just how you spend your money. Review your list of needs versus wants. Your finance plan should fulfill the "needs" part of your budget before a figure can be arrived at for the "wants" piece.

Remember, your main goal in all of this is to never have to dip into credit or money set aside for crucial payments, including a mortgage and keeping the lights on, to buy things you simply want.

Maintain and save
Your financial plan has the framework in place, and you have the motivation to succeed, but a few final tips will help extend your finance plan's lifespan.

Make sure to reward yourself every so often by building in "treats" to your finance plan. Think of this reward -- modest, but meaningful -- as something that brings you joy and motivates you to stay the course. This should be something of value, such as a hobby, and not a frivolous item that could bring regret later.

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Make sure your plan includes money dedicated to savings. Just because you are budgeting, don't assume you can't afford to save money at the same time. Remember, even the smallest contribution, done consistently, can add up to something monumental.

It's often best to set this aside at the beginning of each month, or as soon as a paycheck arrives, to make sure it happens. Think of it this way: You are paying yourself first because your savings is your most important investment.

Use a calendar to map out your billing and payment schedule in accordance with money coming in. You don't have to pay your bills the day they arrive, but you do want to pay them before the due date to avoid fees. Coordinate the time that matches when the funds are available in the account. It does no good to get that payment in early only to be fined for an overdrawn bank account.

Often, creditors will work with you to rearrange the dates your bills are due to accommodate an above-water bank balance.

Lastly, remind yourself that your financial plan probably isn't a perfect roadmap right out of the gate. It will need some fine-tuning, so allow yourself to be flexible and move things around to better fit your budgeting and scheduling as you get used to this new practice.

Trying to cram that square peg of your life into the round hole of a faulty finance plan will only leave you discouraged and ready to give up -- or worse, spend.

Follow these steps, and, hopefully, you'll find the financial plan that's right for you, your peace of mind and financial future.

What better way to utilize a buttoned-down, do-gooder of a month?

Jim Staats is a technical support analyst at, the leading, free and secure service that helps consumers simplify and organize all of their bills and household accounts in one place online or via the four-star-plus customer-rated mobile apps. He has a bachelor's degree in industrial technology from California Polytechnic State University at San Luis Obispo. Wedged between stints supporting products at firms including Intuit and Sybase, Jim worked as a journalist reporting on real estate, business, technology, and other issues for print and online publications.

Read/Post Comments (1) | Recommend This Article (4)

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  • Report this Comment On January 05, 2014, at 5:44 PM, Pezzhome wrote:

    We started using a budget program called YNAB a couple of years ago. If you follow the YNAB method, you should not have to think about the timing of your bill payments. The money should be in the bank before the bill arrives.

    It allows you to adjust the budget during the month so that you have less chance of spending too much. Every other budget I ever used told me at the end of the spent too much...and there wasn't really anything I could do about it at that point. With YNAB, I can spend less in another category and keep total expenditures in line.

    It is a little bit confusing when you first start out but stick with it. I've found it to be an extremely effective way to stay on budget. Once you've got it up and running, you just need to keep track of your spending...and you can use a smart phone to do that. I highly recommend it.

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