How to Set and Stick to a Budget

Anyone who lives on a budget couldn’t get by without one. It gives you the comfort to know where you are going and takes the guilt out of splurging when you know there is money in the budget for the expense. I have spent many hours watching Gail Vaz-Oxlade on ‘Til Debt Do Us Part to accumulate tricks on how to budget realistically and achieve your financial goals. I remember watching my mother write out a budget every month of all income and expenses in the well-worn “grey book”. As a result, I was able to save and buy a house at 23 and secure my financial future with my husband in later years. Get Gail’s Book Debt-Free Forever Get Gail’s Book Money Rules Everyone's financial picture looks different, but for all of them a budget can definitely help see where you are and help clear a path and create a plan to your goals. Here are 5 tips on how to set a realistic budget that you can live with and still work towards your goals and plan for the future.

Figure Out Your Goals

Whether you want to be out of debt, save for a trip or put a down payment on a house, figuring out where you want to be in the long and short term is your first step. Knowing what you are willing to sacrifice (giving up your car or cancelling your cable) and what is a priority (your home or child care) will help you figure out where you can cut in your expenses to free up some cash flow.

Write It Down

Sit down with a pen and paper, Excel document or an online budget sheet and write down all your income and expenses. Make a giant list of everything you spend from groceries to what your insurance costs are. This will change as time goes on, so make this a regular exercise every time you get a raise at work, your cable bill goes down or your property taxes go up. If you are looking for a great budget sheet to get started on, check this one out: Online Budget Worksheet

Reduce Your Expenses

There are two parts to expenses on your budget sheet, fixed expenses like your mortgage and car payment and variable costs like entertainment and groceries. See where you can reduce your variable costs, whether it be cutting back on your restaurant costs or trimming your cable bill to free up extra cash in your budget.

Calculate Your Debt Repayment and Savings

Now that you know what your income and expenses are, it's time to figure out what you're going to do with the remaining money (there should hopefully be some, if not, then it might be time to figure out a way to make more money). Look at your debt and decide when you want to be debt-free. Whether your goal is a 1 year or 2 years for now, it's important to create a plan. Don't forget about savings and an emergency fund. Whether you are putting aside $50 or $100 a month, it all adds up over time and helps to create a great safety net so if the unexpected happens you don't have to turn to credit and get into debt.

Stick To It

Probably the hardest part of any budget is to stick to it. This is all about discipline. If you have a realistic budget that you can live on, you can definitely manage it, but may need to deny yourself that new pair of shoes or dinner out with friends occasionally. Remember though, it's all about the bigger plan and achieving those goals for a bright financial future. What tip has helped you get on track with your money? Share with us below!