Lose weight. Go to the gym three times a week. Stick to a
budget. Our New Year's resolutions can end up feeling as
restrictive as a straitjacket, so it's no wonder we often don't
follow through on them. But budgeting doesn't have to handcuff you.
Instead, it should give you permission to spend on what's most
important to you. "Personal finance is more
" says Tim Maurer, a certified financial planner in Baltimore, Md.
"And nowhere is that more true than in budgeting." You make the
rules, so craft them to help you succeed.
Working out a theoretical budget is great. But if you're having
trouble putting it into practice, you may lack motivation.
Discipline is easier to embrace when it comes with a reward. Your
goal might be to save enough money for a Caribbean vacation or a
down payment on a new crossover. Or maybe you just want to stop
living paycheck to paycheck.
If you have a big monetary target -- say, to save $30,000 for a
down payment on a house -- break it into smaller goals so that you
can see the light at the end of the tunnel. Farnoosh Torabi, author
Psych Yourself Rich,
advises sharing your goals with someone; like going to the gym,
financial goals are easier when you have a buddy to help keep you
Account for all your expenses.
You may know what you pay every month for housing, utilities and
your car loan, but what about clothes and eating out? Do semiannual
expenses such as insurance and gifts throw you into a financial
tailspin? You're not alone.
To see the big picture, you'll have to take stock of your
spending. That's easy if you track income and expenses at a
budgeting site, such as Mint (see
Best Online Money Management Tools
). If you aren't already using a budgeting tool, tally up all the
big expenses that don't come every month and estimate your annual
costs. Divide that by 12, and add the amount to your monthly
budget. Then review credit and bank statements for several months
to see what you're spending. After that, you can set realistic
targets for monthly outlays and savings. Don't forget to set
something aside for unexpected expenses.
Build in wiggle room.
If you're overspending every month, it may be because you haven't
built in a buffer zone for each category. Adding a buffer means you
won't bust your budget if you spend more than you expect. Whenever
you spend less, the buffer-zone money can go to savings or toward a
splurge. (And if you've put your savings on autopilot, you'll feel
freer to spend the money that's left over.) "Give yourself
permission to change your budget if you get a raise or your tastes
change," says Torabi. "A budget should mirror your life at the
moment, not keep you stuck in time."
Make a commitment.
Plan a time each week to sit down, track your spending and see how
you're doing. If you wait, you'll fall behind and you won't be able
to adjust spending to stay on track. And let's face it: You have to
make trade-offs to reach your goals. If you spend too much on
eating out, cook more gourmet dinners at home. Change your route to
work so you don't pass the Starbucks every day, or head to the gym
instead of happy hour more often. Before you know it, budgeting
will become a habit, and you and your wallet will be happier for
This article first appeared in Kiplinger's Personal Finance
magazine. For more help with your personal finances and
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