A Beginner’s Guide to Budgeting Success

A budget is only helpful if you set it up and manage it properly. Take these steps to be successful with your budgeting efforts.

One of the primary keys to financial success is budgeting.

A budget acts like a roadmap to your financial future. Without a good one, it may be very difficult for you to reach your desired destination.

Here is a guide for those new to budgeting or those who have previously struggled with budgeting.

Get the Facts

The best place to start with your budget is to assess where you currently are. You are off to a good start if you save your receipts or record them using a spreadsheet, software such as Quicken or a budgeting app like Simplifi by Quicken.

If not, don’t worry. Just be diligent in recording all of your expenses for the next 90 days to give you a rough estimate of your spending habits.

Next, separate your expenses by category and calculate a monthly average for each. Add them up and compare the total to your average monthly income. Do you have a lot of breathing room, or are you just scraping by?

Chances are that even if you end the month with a positive balance, you will find that some areas need to be trimmed down a bit.

Start Small

One of the biggest pitfalls in working with a budget is being overwhelmed with all the information.

Budgeting is about making your money work for you, so you want this to be an enjoyable process (or at least not a highly stressful one!). Therefore, it is essential to start by focusing on just a couple of key “problem” areas and fine-tuning your results from there.

Review your monthly expenses and see if any areas seem out of sync with the others.

Is your dining expense twice that of your grocery bill? Could you take a mini-vacation for the cost of your phone bill? These types of observations will help you hone in on areas that need attention.

Also, keep in mind that your most significant expense may not always be the best place to focus your efforts.

For example, your mortgage is probably your largest monthly expense, but if you’ve got a competitive interest rate, there may not be much room to maneuver at this time. However, if you spend close to that much on discretionary expenses such as entertainment, then you have a good idea of where to start.

In budgeting, proportion is key.

Related: Simple Steps to Reducing the Family Budget

Creative Accounting

Accounting for your expenses is one of the primary keys to continued budgeting success. If you don’t keep track, you may get off course and not realize it until it’s too late. This is especially true for discretionary spending.

For example, my family’s “problem area” is dining out. Going out to dinner is a big treat for us because we have busy work schedules and enjoy taking a break without thinking about the chores we need to do at home. Since this is an area we need to keep a close eye on, we ensure our dining expenses are tracked daily.

We set a weekly budget, and every day, we jot notes about what we’ve spent. To ensure we don’t forget, we keep the “worksheet” in a very visible location, on the kitchen counter. At the end of the week, I tally it up in Quicken. Receipts can pile up, but being forced to “fess up” on a daily basis keeps us truer to our goals.

Being creative in how you account for your discretionary expenses can be very helpful in keeping them under control. Try this or a different method for keeping the spotlight on your “problem areas.”

Forgive Yourself

The last but not least important point is to forgive yourself. Everyone goes over budget from time to time. Budgeting is not an exact science, and there is room for error.

However, if you find you continue to do so regularly, it is time to reassess your goals and look at the accuracy of your estimates.

Finally, be certain that you have set aside some money in your budget for fun and entertainment. Budgets are crafted based on where you want to end up in the future, but they also need to provide for the enjoyment of the here and now!

• Small Splurges That Won’t Break Your Budget
• Recommended Budgeting Tools and Apps
• The Envelope Budgeting System in a Cashless Society
• Guidelines for Calculating and Budgeting Debt Repayment
• 7 Steps to Budgeting on a Variable Income
• How To Stick to a Budget and Still Use Credit Cards

Reviewed October 2023