Sticking to a Budget

/ BY / Personal Finance

It's nice when family finances run like a well-oiled machine. With bills paid on time and money left at the end of the month, it's good to know your budget is working for you. Successful family money managers create budgets that they can live with and stick to by following five simple rules.

Rule One: Make an Honest Inventory

Most of us think we have fewer bills and more money than we actually have. Our family budget is doomed to failure if we don't have an honest and accurate idea of our expenses and income.

Before you sit down to make your family budget, track your income and outgo for a month. Keep a scrupulous record of everything you spend. Mark paydays on your calendar. List irregular payments that you need to save for such as yearly dues or car registration.

Organize your survey so that you can build an accurate budget without looking through piles of paperwork. By listing debits on one piece of paper and credits on another, the information you need to make your budget will be easy to find and understand.

Rule Two: Balance Your Finances

Many people believe that balancing your financial sheet is the same thing as creating a budget. Before you can create a budget, or spending and savings plan, you need to start with balanced family finances.

Carefully examine the totals you discovered during your financial inventory. If you have a positive balance sheet, you are ready to move on to Rule Three.

If you have a negative balance sheet, you have some work to do and decisions to make. You need to put yourself in the black before you can create a spending plan for yourself. There are literally hundreds of ways to balance your finances. Relatively pain-free cuts include:

  • Lowering entertainment spending
  • Cooking low-cost meals at home
  • Obtaining a less expensive vehicle

Rule Three: Eliminate Consumer Debt

Experts agree that the most significant drain on family finances is consumer debt. Even if your "budget" balances, debt payments siphon funds away from more profitable balance sheet line items such as savings and investments.

Work to eliminate consumer debt by paying off credit card balances monthly. Plan your purchases, watching for sales, and save for the items you want. Use credit cards like cash back credit cards or rewards credit cards that offer added value to your budget.

Rule Four: Save for a Rainy Day

An emergency savings account is an essential part of a sound family financial plan. By having cash set aside for the inevitable rainy day, you avoid budget busting emergencies that can add debt and rob funds set aside for essential items such as mortgage payments and transportation costs.

Try saving a few dollars each pay period. Such funds grow faster than you might think and provide you with a valuable monetary cushion.

Rule Five: Build a Budget You Can Live With

Once your balance sheet is in the black, it's time to build your budget. Remember that your budget is a valuable money management tool and should reflect your financial goals. It's exciting to live within a budget that allows you to save for present wants and future needs.

Be honest and realistic about your personal spending habits, budgeting for things that are important to you. Don't cut spending in areas like food or entertainment that you know you will not stick to.

Building a budget you can stick with means designing a financial plan that is built upon a solid understanding of your monetary situation and your financial goals.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.