Budgeting isn’t something that is set in stone
so before you settle on a final budget, do some
groundwork, and make sure that you’re comfortable
with what you’ve planned.

The KEY aspect to budgeting is not looking at
‘how do I afford to do or pay for X’. Instead,
look at what your budget allows you to do. It’s
important to look at your income and allow it to
lead your budgeting because it is one way to
dictate your natural affordability borders, but
remember that you can save in one area to afford
better in another area of your life.

Before you create a budget

1. Check your incomings and outgoings ” as you
would with the basics of a budget, but make sure
you account for *all* bills ” include any costs
you have yearly for things such as your car or bike
(insurance, repairs, maintenance). Remember too, to
use your ‘random’ income, like ebay sales, towards
your important bills, or save them. Don’t just
spend them when they arrive, and instead use them
in the next month’s budget.

2. Be honest about your spending. No one is judging
you and it’s possible that you’re spending more
money than you should because you’re making impulse
buys. You can stick to your budget and avoid these
‘impulse’ buys by examining what you’re spending
money on, and deciding *why* you spend it. Impulse
buys are the main reason budgets don’t work, so
keep track carefully.

3. See if there’s any way you can comfortably cut
down instead of eating out, consider buying a
‘bundled’ meal from a supermarket and cooking
yourself. Swap a night at the cinema for a bundle
of movie rentals, and your trip to the local theme
park to a local park or outdoor area set aside for
recreation. You could also look at whether you can
save money by commuting with friends in a car pool
(saving on parking and petrol, even if you take it
in turns) or cycling, bussing, or even walking to
work. You should also investigate loan consolidation
essentially rolling several high interest debts into
a single lower interest one. Sounds like a good idea
in theory, but if you don’t do it right you’re likely
to wind up in even more trouble.

4. It takes around a month of careful tracking to
check your budget fully. There are plenty of tools
online for varying tastes, and you’ll only find the
right one for you by doing some research. You can
also find desktop based budgeting tools, or those on
smart phones or PDA’s. iPhones and similar have
different apps.

Once you have a budget

Once you have a plan, remember, you can change it.
Making your budget with a small amount of flexibility
will give you a degree of freedom that will make it
easier to stick to and give you a small buffer zone,
if anything happens to go wrong.

5. Try to make your savings a part of your budget.
Pay essential bills; pay yourself (SAVE) and then
pay for the non-essentials such as recreational
activities beyond basics.

You need to remember to build some fun into your plan,
but if you go beyond that, you’re possibly spiralling
back into one of the behaviours that caused you to
need to budget in the first place. While you’re fixing
your budget, consider too, looking at savings accounts
and comparing them. Use one of the many online
comparison sites to make sure you’re getting the best
from any credit cards and savings you’re using.

6. Create accountability if you’re keeping a budget
with family or friends; you’re more likely to stick to
it, so share your budget. If you’re a household with
multiple income streams, then you should share the
burden of the budget in an equitable way.

7. Remember that emergencies happen! The top reason
budgets stop working is because people don’t budget
for emergencies and their careful plan doesn’t work
if things go wrong.

Budgeting when money is tight The main reason people
budget is because they’ve discovered their income
isn’t matching their outgoings or discover that they
are sliding further and further into debt with credit
card bills and no money at the end of the month.

8. If you find that you’re in more debt than you can
handle, create an ‘outgoings’ only budget, for essentials,
and then try to negotiate with your debtors. It will
impact your credit file in most cases, but not as badly
as letting the bills lapse. If you’ve been made unemployed
or find that your income suddenly changes, let all of
your debtors know as soon as you can. They may be able
to help, or at least freeze the interest on your debts.

9. If you really have no choice and start missing
monthly payments on your bills remember that there is
help out there, but your budget may fall partially out
of your control, because using debt management companies
or similar advice groups might create a budget that you
may not have chosen. It’s important then to create a
budget that allows you to regain control, as soon as
possible.

Remember, the main way to deal with a budget is to
change your perspective. Don’t ask ‘how can I afford X’
instead look at what you can afford and find ways to
change the brackets up, or down to make allowances for
the things you really want.

10. At the other end of the scale, if you’re changing
your budget to save for something such as a wedding
or a new child, you’ll find that budgeting is easier
because saving isn’t as difficult as living under bills.
These budgets are slightly different because sticking
to those have a positive outcome instead of a neutral
one, but the principles behind them are the same.
Remember to check you’re getting the best rates for your
savings.

11. BONUS TIP: Don’t include any interest you’re
making on your savings or pay in with your calculations.
At the end, you’ll be able to use that extra money,
no matter how small, for whatever you like. Once your
budget is under control, consider making sure you’ve
always got a savings buffer, for the harder times,
or for those things that you really want later.

Remember that ultimately your budget is always in your
control, and if it isn’t take steps to get it there
so you can move on with your life without the worry of
watching your money constantly.

Remember too that your budgets are temporary, unless
you find a pattern of living that you enjoy, and that
harder budgets in the short term can lead to easier
budgets in the long term, and you can find a comfortable
lifestyle that you can live with, which is the most
important way to make sure you stick to whatever
budget you create.

About the author:

Author: Gen Wright

I hope you liked this article!  Debt Loans, Australia’s premier Personal Finance Blog!

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