How to Build and Maintain a Budget

Maintaining a budget can be a difficult task. Obstacles like employment, fulfilling obligations, unexpected car trouble, and unanticipated home repairs can make budgeting seem impossible. With all the other things that need attention, budgeting can often be neglected.

Creating a budget you can stick to can be challenging, but there are ways to ensure your financial goals are met. Here are several of the most common budgeting missteps and tips to help you build a budget that works for you.

A budget may help you reach some financial goals

The very thought of creating and maintaining a budget may make you feel stressed, but creating a budget should be an exercise that allows you to see where your money is going, so you can find better ways to reach your financial goals. Sure, it’s a lot more fun to go out to dinner with friends or buy that new pair of shoes than paying the credit card bill and covering the car insurance this month. But if you set up your budget properly and exercise a little restraint, you can have your cake and eat it too.

When building your budget, be sure to include the things you want. If there’s a new flat-screen TV you’ve had your eye on, include that in your budget strategy. At the same time, take into consideration your financial goals. If you want to pay off your debt quicker but are falling short, evaluate your budget to see if you can restructure it to pay more toward your debt. Structure your budget so that it will allow you to do both. It may mean that your timeline for reaching those goals may be a little longer, but it also could mean you can accomplish it all.

Ensuring your budget stays on track

After you’ve looked at all your expenses, compared them to your monthly income, and set aside some for savings and leisure, the next step is to document how much you’ll allocate each month to those buckets and stick to it.

Some fiscal pros endorse the 50/30/20 method as a successful way to budget. This is how the 50/30/20 system distributes your income:

• Half (50%) of your money should be put toward your needs (housing payment, utilities, food, loan repayments)
• A portion (30%) should be used for your wants (new clothes, a night out with friends, streaming subscriptions)
• The remaining amount (20%) should be put into savings

The 50/30/20 method may not quite fit your needs, but no matter your financial situation, laying out some guidelines to allocate your money could help you better understand where your funds are going.

People often abandon their budgets because of unforeseen circumstances. Common reasons budgets can fail include:

• An unexpected expense takes precedent
• The amount of debt and/or interest payments aren’t factored in, and debts aren’t paid down quickly enough
• The budget is too restrictive, not leaving room for fun and relaxation

Here are some tips for overcoming these difficulties and maintaining a budget.

Allocating funds for unexpected expenses

Budgets often go awry because unanticipated expenses arise, and it is easier to readjust if incurring a financial loss.

An emergency fund is a must for unexpected expenses. It’s also important to factor in expenses that may occur regularly. When building your budget, don’t overlook more unpredictable costs, such as taxes, car repairs, or annual subscriptions you may not see each month. Doing this will allow you to pay most of the cost when the bill arrives, rather than resorting to depleting your emergency fund or maxing out a credit card and possibly ruining your budget for that month.

It’s okay to make changes to your budget

Don’t feel bad if you need to change your budget because of a financial shift. If you’ve experienced a loss of income, a financial emergency, or some other circumstance that throws off your original budget, make adjustments. Despite the potential of going over your spending limits, the true purpose of a budget is to manage funds successfully.

When life happens, it’s totally acceptable to restructure your budget to make it work better for you. And when things improve, or you discover your budget isn’t optimal in the future, modify it again.

Don’t tighten the belt too far

Often, when people build a budget and really look at their monthly spending, they can be shocked at how much cash is squandered on unnecessary things. If that happens to you, you might decide to cut back on all your excess spending. Before you know it, you may be unhappy with your budget because you’ve cut out the latitude for fun.

Unless you’re in dire straits financially, feel free to allocate funds for the things that you enjoy doing. Just be sure to stay within your means. This isn’t an excuse to be frivolous with your money. Instead, it’s a way for you to still have fun while making sure you’re managing your finances properly.

Make time to regularly organize your budget

Finding the time to revisit your budget can be difficult, so it’s important to set a goal to look over it at least once a month. Making and maintaining your budget a part of your routine will quickly take the stress out of your financial obligations and help you see ways to reach your financial goals.