Admit it. You can’t afford not to budget. There are plenty of people out there who–despite their six-figure income–still find themselves in a vicious paycheck to paycheck cycle. The only way out? Budget. A good budget fits snuggly, but isn’t suffocating. It gives direction but isn’t overbearing. A real budget is constructive, not constrictive. My guess is, you’ve been in a bad-budget relationship most of your adult life. That good-for-nothing budget promised you extra money in your account and an end to your problems. Instead, you found nothing but store-brand beans, frustration, and a building sense of failure. You probably left the budget, then came back. Left, came back. Apologized. Left. Came back. Left. It isn’t you Budget, it’s me. I just can’t do this. It’s too hard. Budgeting shouldn’t be dramatic. Healthy money management isn’t painful. When set up right, a budget is empowering. Let me assuage your fears (and let me use the word “assuage”) by helping you avoid some common budgeting mistakes.
1. Don’t jump the gun.
Only budget money you already have. Forecasting creates more hurt than help. Budgeting only what you have in your accounts right now gives you more control and helps you make better decisions. Add on top of this a zero-based budgeting approach, and you’ll never exceed what you have on hand. This prevents future “budget failure” (i.e. you failing to realize how much money you really have). The control you’ll feel over your money will certainly spur you on to continue budgeting.
2. Spontaneous budgeting doesn’t work.
Until now, you’ve most likely been a reactive spender. An expense presents itself, you mentally process its level of importance right then, and either spend the money, or walk away. More often than not, it’s not a necessity, but you purchase anyway, and eventually feel guilty. It’s never effective to decide on-the-fly about your purchases. Determine your budget goals at the beginning of each month while you’re not having an emotional reaction to some slick marketing. A budget will transport you into the world of pro-active spending—a place where you base your spending on personal priorities. No more pressure situations of “Should I, shouldn’t” when those $50 boots are staring up at you from the table. How much money is left in your shopping category? $27? Sorry Charlie. $62? Go for it. A budget is just another word for “plan.” So figure it out ahead of time and enjoy a life of guilt-free spending.
3. Record all of your purchases.
There’s no short-cutting this. Keeping track of your spending habits builds much-needed awareness. It might be a painful lesson once you realize you’ve been spending $200 on eating out every month, but better to learn that now rather than years later. Once you gain a sharper understanding of where your money is going, you’ll be able to make positive change. Record what you spend. Record. Record. Record.
4. Overspending is inevitable.
You WILL overspend. Overspending in one of your budget categories is part of the learning process. It doesn’t mean you failed—it means you gained knowledge and experience that can be applied to next month’s budget. Ooh I went $30 over my Grocery category. But I didn’t spend as much in Gifts as I thought I would. I’ll adjust those amounts for next time. Don’t let a failure mentality overtake your efforts to consistently budget. It will be pretty hit and miss at the beginning. Stay with it, keep a close eye on how each of your categories are doing, and pretty soon, you’ll be amazed at how tuned-in you are with your spending.
5. Nothing is static—especially money, and even more especially—Life.
Things happen. Expensive things. A good budget won’t be rigid or unyielding, rather it will ebb and flow with your needs. That’s not to say there’s no accountability. Pay back those categories where you overspent before budgeting for the next month. This prevents an “oops, ah well,” mentality. Your budget is there to correct you. Let it do its job by honoring the spending boundaries you set for yourself. Build a budget on these five, simple steps and you’ll find your life filled with more than store-brand beans. You’ll feel peace of mind, control, and clarity. Budgets aren’t bad. Bad budgets are bad. Learn how to create a living, intuitive budget and you’ll be amazed how your money situation is transformed. Welcome to budgeting bliss. Jesse Mecham is founder of the financial software company, YouNeedaBudget.com—because you do! Based on four fail-safe rules, Jesse’s revolutionary software teaches a method that helps people break the paycheck to paycheck cycle, get out of debt, and save more money faster. You haven’t budgeted like this. If you haven’t heard of You Need a Budget, click on this link to view the YNAB tour.