Money management means that you control your money — it doesn’t control you. It’s about ensuring that each dollar goes where you decide it should. A budget will help you do that.
There is no one right way to budget. The most important thing is to use whatever system works for you so you’ll be able to stick with it. If you don’t already have a budget, here are some ideas and tips to help you create one that’s right for you.
Set realistic goals.
Identify your short- and long-term goals and determine a logical order for achieving them. While challenging yourself is important, don’t stretch yourself too far: if your goals are too difficult, you may be discouraged.
Set realistic budget amounts.
Don’t budget unrealistically low amounts for necessary items. Tracking expenses before setting up your budget should give you a good idea of what things actually cost, and where you could trim expenses if needed.
Decide what’s important to you and learn the difference between needs and wants. What are you willing to give up or change to make your budget work?
Place a high priority on regular savings.
Don’t wait to start saving; make sure it’s one of the things you budget for. Use payroll deductions or automated savings whenever possible—you can’t spend what you don’t see.
Understand that even with a budget, unexpected things will happen.
Set aside enough money for an emergency fund to cover three to six months of expenses. If you use these funds, make it your first priority to replenish it as soon as possible.
Set yourself up for success, not failure.
Be patient—results take time, especially if you haven’t had a budget before. If you’re budgeting for a family, talk to family members about the budget—get them to “own” the budget, rather than having it “inflicted” on them.
When you set up your budget, be sure to consider rewards. Everyone needs a reward sometimes. Be creative and find ways to make rewards no- or low-budget events.
Don’t wait until you have the perfect budget
Your budget is likely going to change over time. You may find out your original plan just doesn’t work or there may be changes in your income or expenses. Don’t let this stop you from moving forward. If money management is a problem, take the first step and implement a budget as soon as possible.