Budgeting is an easy-to-follow step-by-step process, once you learn the reasons budgets tend to fail and why most people give up.
Follow these steps to fool-proof your budget.
1. List financial goals
2. List monthly income
3. List monthly expenses
4. List non-monthly expenses
5. Track spending
6. Add ‘em up
Tip: In order to make your budget more or less the same from month to month, and therefore making the budget process more smooth, there are a few more things to do.
- Protect your budget from unforeseen financial disasters in the future by building an emergency reserve. It’s recommended to have 3-6 months of expenses in a high-yielding savings account. This should be only for true emergencies.
- Include a miscellaneous category in monthly spending for the unexpected (but not emergency) expenses, such as buying flowers for a coworker who retired, or for a small gift for your friend’s birthday. These expenses aren’t usually drastic, but having a “misc” fund can help solidify your budget and protect you from drawing from saving or going negative.
- Give yourself and maybe everyone in your household a personal allowance. This will ease the “Mom/Dad can I have some money?” and will protect you from spending too much. It helps teach personal responsibility and prioritizing, and also makes budgeting not so bad when you get your own little sum of money to spend on whatever you’d like.