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

• 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.
• Be honest about your spending. No one in 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.
• 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.
• It takes around a month of careful tracking to check your budget fully – there are tools online, such as Kiplinger or similar.  You can also find desktop based budgeting tools, or those on smart phones or PDA’s.  iPhones and similar have different apps, like Mybudge. And if all else fails, you can’t go past the old school option: Pen and Paper.

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.

• 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.
• 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.
• 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.

• 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.
• 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.

• 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.
• 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.

Don’t forget that ultimately your budget should always be 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.

Photo by Jeff Keen

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