A lot of people treat budgets like New Year’s resolutions. They are lofty and unrealistic goals with only an 8% chance of becoming reality. But that’s not how it’s supposed to be.
Budgets are supposed to be personalized money management tools that help you take control of your finances. If you don’t have a greater sense of control and empowerment, then your budget isn’t working.
If you don’t have the kind of budget I’m talking about, then you really need one. Follow this link to learn how to make a budget that serves as a GPS and not a jail cell. Once you’ve got your GPS budget going, here are a few simple ways to make budgeting easy and effective:
Smooth Your Expenses
If you have a car, you pay for maintenance and repairs. But I hope you don’t have to every single month. Sometimes you can go for months without spending a dime on your car, and then, wham! New tires and a head gasket all at once!
It’s hard to scrape up $2,000 for maintenance and repairs in one month. So, what’s the best way to budget for $2,000 worth of car expenses when they all happen at the same time? Smooth the expenses over the entire year.
Over the course of a year, about how much do you spend on maintenance and repairs? Take that amount, divide it by twelve, and save that much each month. If you usually spend $2,400 on your car in a given year, set aside $200 a month so that when your transmission goes, you already have the money to pay for it. This method also works for things like Christmas presents, vacations, and life insurance premiums.
Change Your Budget As You Go
Sometimes, an unexpected expense pops up during the month. Don’t be afraid to adjust your budget mid-month to accommodate it.
Last month we had to buy my son glasses. He had never worn glasses before, so it was an unexpected expense. I could have taken the money out of savings, but instead, I changed my budget. I lowered the amount I was going to set aside towards a vacation and put that into the medical line instead.
Budgets are not written in stone. Go ahead and change it if you need to. Remember, your budget exists to serve you, not the other way around!
Have A Miscellaneous Category
Where do you account for the coupon card that you bought from the neighbor boy who was raising money for his baseball team? Where do you account for the photo prints you just ordered? Or your passport renewal fees?
There are a lot of little expenses that come up and don’t fit neatly into one of your normal budget categories. In fact, almost everything I buy at Target fits this description. It’s miscellaneous stuff that doesn’t really have a specific home on my budget.
Your budget should include a Miscellaneous category for little things that slip into your shopping cart but don’t really fit into any of your budget categories. However, if you find that your Miscellaneous line becomes a large part of your budget, it might be a good idea to break it down a little so you have a better idea of where your money is going.
Don’t Get Too Complicated
It might make you feel sophisticated to create a detailed spreadsheet for your budget, but if you’re not going to use it, it’s just a waste of time. And downloading the latest budgeting app might make you feel cool, but if you’re not going to use it, what’s the point?
We tend to believe that the more complicated something is, the better it is. Not true at all. When it comes to budgeting, all that matters is that you find a system that works for you.
If you like having things written on paper, forget the computer and smartphone and do it. Be proud of your pen. If you know you won’t track things if you have more than 5 categories, then just stick with 5. It’s better to plan for and track your expenses in 5 categories than to ignore them in 25 categories.
A note for you married couples: Your budget should only be as complicated as the less-complicated spouse. If you’re a super nerd like me, you can use a simple budget even if you secretly crave something much more detailed. However, your non-super nerd spouse won’t even touch your 5-page spreadsheet, no matter how useful the calculations you’ve programmed into it. If it doesn’t work for both of you, it doesn’t work at all.