We all know that sticking to a budget is the best and easiest way to manage your personal financial affairs.
But as someone, probably a wise accountant, once said: “The devil is in the details.”
Which are the absolutely essential elements that will make that budget foolproof? How can you predict, or at least be prepared for, the unpredictable? And what will make you stay faithful to that spending plan come hell or high prices?
Smart budgeting tips to make your everyday accounting easier start with being alert to the well-known dangers that can befall anyone trying to follow a common budget.
The pitfalls of living on a budget
Buying on impulse is, in fact, probably the biggest danger to sound financial planning. They can be tiny transactions. But, if you add them up, over time they become a major outlay.
Similar dangers to planning are posed when you become a victim of budget-busting social encounters.
You’ve been on budget all week when you go out with friends to do something fun. But somebody in the crowd makes an impulsive — and expensive — choice of restaurants, entertainment or other destination.
By the time the evening’s over you realize you’ve spent much more than expected because of social pressures.
Being undisciplined can certainly be a danger to your budget, but trouble also comes from the opposite extreme.
Sometimes being too frugal about your money makes you miserable enough to rebel. That’s when a major spending binge can seem like just the emotional answer you’ve been looking for.
Unfortunately, that binge is going to set you back far more than if you’d just lighten up a little. On occasion treat yourself and go for a minor splurge to give life some balance.
And you can’t always get the most value from your money by habitually doing things the cheapest way. Sometimes “least expensive” isn’t best way.
Try listing the things that you value by order of importance and then compare your spending to your list. It’s a way to assure you’re getting what’s important out of life.
Awareness of the pitfalls of budgeting and access to tools that will help you budget properly will do little good without a third element. You must exercise the discipline to stick to your spending plan. That’s why smart budgeting tips should allow for easy budgeting.
1. Create an emergency fund
First and foremost, you must set up an emergency savings fund where you can set aside money for unexpected expenses.
A major car breakdown will not be in most common budgets, but they are pretty common occurrences. Similarly, we don’t plan or budget for out-of-town travel to family funerals, or minor medical emergencies, or natural disasters, but they do happen.
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2. Check on your budget regularly
First, don’t forget to write down every expense. A good way to remember everything you buy is to update your budget each night before you go to bed while your purchases are still fresh in your head.
And also don’t neglect to write down those impulse purchases that are likely the reason why you’re being so budget-conscious.
Go ahead and write it down because it will be a lesson that may help prevent you from doing it again and overspending even more.
If you know you can’t check your budget every night, make it a priority to check your budget on a weekly basis — you might create Google alerts on your calendar to send yourself reminders.
Sit down and review whether you’re continually exceeding your limits in a particular budget category, it may mean you’ll have to readjust the amount allowed. Unless your income will adjust proportionately, you’ll have to evaluate what’s most important to you and sacrifice other items.
3. Use a budgeting app
When out and about, carry a hard copy or electronic version of your budget with you. Using any of the budgeting tools below, or a personal finance app can make this easy.
When that dress in the window calls your name, you can pull out your budget and consider what to juggle around. There may be a tradeoff, like your next hair salon visit, that could pay for the dress.
4. Always keep the total in mind
Daily errands, such as grocery shopping, can easily sabotage a budget. Keep a cumulative total of your grocery cart’s items as you move through the store, and be sure to come prepared with a list.
You can take stock and see if you’ve exceeded your weekly budget before getting halfway through the store. Take advantage of today’s sale prices and choose some generics to reduce next week’s grocery bill, but remember to make a note of this.
Another important move is similar to the emergency fund but not so critical. You can also plan ahead for spending by listing special events in your budget.
Check your calendar to give yourself some warning. If you know you have a wedding in five months, reduce your monthly spending on clothing now to allow for buying a special dress then. You also can plan for vacations, or landscaping projects, or home improvement needs in the same way.
Helpful online budgeting tools
Any tool you choose can help you implement smart budgeting tips if you use it on a regular basis and update accordingly. The choice of which online budgeting tool to use comes down to your priorities, whether they’re freely accessible, they link to your accounts, provide customized fields or track IOUs. Here are a few:
Mint is the app standard. This personal finance management site helps you track and categorize transactions easily and automatically. Available on Apple’s App Store, the Android Store, as well as online, the tool can be used on a computer or mobile device for quick reference. The app is free but Mint requires your bank name and password to link to accounts for automatic updates.
BudgetPulse is for the security-conscious and it’s also free. It doesn’t require user bank account information for tracking, but you have to manually enter or import banking data from computer files. As with many budget tools, BudgetPulse allows users to set up budgeting and saving goals.
BudgetTracker specializes in tracking transactions, with or without a link to your bank account log-in information. The unique feature is the ability to customize applications on the site. Disadvantages are the inability to download transactions from your bank account and some delay in syncing with your accounts.
Buxfer specializes in budgeting and tracking group expenses. It allows users to track loans and IOUs from friends and family as well as providing group budgeting — a handy tool for vacations and college budgeting. There are fees for unlimited accounts and higher fees for forecasting, advance reports, online payments and data back up.
Similar to the other tools in most functions, moneyStrands also focuses on financial planning by generating budgets based on spending habits, along with personal financial tips for each user. It is also free.
These tried and true smart budgeting tips are designed to pay off nicely for your bottom line and make your financial life a little bit easier.
Jeff writes about real estate, mortgages and homeownership.