A budget is nothing more than a strategy to track your money in and your money out, before you spend it. When done correctly, it’s not about eliminating all the things you love. It’s about knowing where your money goes, filling in the missing numbers, and allocating more of what you spend towards your priorities—whether that’s debt repayment or saving up or simply sleeping well at night.
Why Most Budgets Fail
Here’s the thing: Budgeting failure is not typically a matter of will-power. It’s a design problem. People make budgets based on guesses rather than numbers and when reality sets in, the budget fails.
Some budgets are so exacting that they don’t last through a typical week. Others are so loose that they don’t do anything to guide. If your plan will not allow you to have a $40 meal out or catch an Uber to the office in an emergency, you’re going to end up abandoning your plan in less than a month and that’s not your fault.
What makes budgets that survive till February, different from those that lose steam by February?
- They’re based on actual spending data, not estimates.
- They’ve got the space for the indulgent treat now and then
- After the first week someone reads them again!
- They connect to a purpose, not just a spreadsheet for the sake of a spreadsheet
There is no need for perfection in none of this. It only takes a little more practice to get there.
Step 1: Track What You’re Actually Spending
If you don’t measure your budget, you can’t fix it. Once people have accounted for all of their money, they’re surprised at what is leaking out with their small, inconsequential purchases: a food delivery, an unpaid subscription.
Wait one month. Get the tool you are going to use – the notes app, the spreadsheet, or one of the budgeting apps that connect to your accounts. It’s not as important to do it in a certain way as it is to do it.
When the month is over, divide all that into some basic categories: housing, transportation, food, debt, subscriptions and the “fun money” category. This is where the picture typically changes. Three coffees per week can cost over $900 annually and no one knows about it, do you? Not a guilt trip, I dunno. The information is helpful to have before making a decision about what to alter.
Step 2: Pick a Method That Actually Fits You
No one has a “right way” to budget, despite any advice you get from finance influencers. It will depend on the amount of structure you seek, and the amount of time you want to put into maintaining it.
A few worth trying:
- The 50/30/20 rule – 50% needs, 30% wants, 20% savings or debt payoff. Ideal for newbies who want some structure but not to keep a close eye on the money.
- Zero-based budgeting – allocating each dollar a task until income equals expenses. Increased control, but it requires dedicated time weekly.
The envelope system: Using cash or electronic “envelopes” for each category; when the envelope is gone, you don’t spend any more in that category. Works well if you are someone who likes to overspend on flexible items such as eating out or food.
Provide One Method for a full month, then switch to another. Often the reason why budgeting does not feel natural is that it’s a bouncing-back-and-forth phenomenon that occurs every couple of weeks.
Step 3: Leave Room to Breathe
If you don’t have any flexibility in your budget, it’s going to crack as soon as you have to deal with anything out of the ordinary. The car repairs, the birthday gift, that dentist bill that you forgot about.
Add a category for Buffer, specifically for this. Even if you save 50-100 a month specifically for “life happens” bills, you still won’t have a surprise bill derail your entire plan.
It also aids in the budgeting of little amounts of guilt-free spending with intent. If a plan has nothing fun in it, it doesn’t pass on a Friday night. Practice flexibility from the outset and not look at any variation as a failure.
Step 4: Check In Every Month
The budget is not a one-and-done. This requires a consistent appearance, or it will gradually lose its resemblance to reality.
At the end of every month, set aside 15 or 20 minutes and then ask yourself:
- Where am I over and why?
- What should you be cutting or trimming in your garden or yard?
- Were there any changes in income or expenses?
- Does this still make sense with what I’m trying to do with my money?
If food bills continue to be high, then don’t continue to battle them monthly. Simply increase the number and harvest from another location. You can’t solve budget problems once and for all. It’s a series of little fixes, applied repeatedly until it works as you want.
Final Thought
Not the most detailed one or the most strict one is the best budget. This is the one you’ll be using six months from now.
Use actual numbers rather than estimates. Choose a strategy that is effective for YOU, not for others. Be open to the unexpected. But do check it on a monthly basis, rather than hoping for it to run by itself. None of this makes budgeting easy! But it’s the permanence of it, and it’s supposed to be permanent.
