So this will be the year you set and really follow a personal
budget. The goal: less debt and more savings for retirement, a
down payment for a house, travel -- you name it.
To make 2013 a success, you'll need a budget that's easy to
follow. As you begin, consider four keys that will help you
finalize and stick to your game plan:
Consider the past.
Neal Frankle, a CFP and founder of
, recommends comparing how much you think you spend against
"If you add your total withdrawals from your last 12 bank
statements, that's how much you spent -- period," he said. "I
tell clients when they do this exercise to not be surprised if it
is 30% higher than what they thought."
The sobering effect launches many clients into action. Frankle
reminds clients that little steps can pave the way for major
"Most people who ask about budgeting know they have to make a
change," he says. "They start small and find it's actually fun to
see the progress they make."
Move toward automation.
No need to don eye shades and sleeve garters as you pencil
numbers into a ledger -- unless that's your thing. Plenty of
websites and books have worksheets to help you categorize your
income, expenses and debt. Websites include
. Also, check your bank, brokerage or mutual fund firm for them.
Favor those at sites you already visit.
"Automation is a budget's best friend," said Ebong Eka, a CPA
for Levyti Consulting, adding that going digital promotes good
If you haven't already done so, consider opening a separate
savings account and having a portion of each paycheck deposited
directly in it.
Set reasonable expectations.
Leave a cushion, space for error in your budget.
This scenario explains why: "You expect your cell phone bill
to be $100 every month, but last month you unexpectedly went over
your minutes," Eka said. "Leave some room in the budget if there
is a likelihood of a repeat occurrence."
He favors setting aside a separate category for the cushion
rather than padding others because it fosters discipline.
Lisa Fox, a CFP and director for financial planning at South
Texas Money Management, emphasizes the value of reasonable
"Make sure you are setting a realistic budget," she said. "
You don't want it to be so restrictive that you're going to not
want to follow it altogether."
Periodic monitoring is needed once your budget is set. Start out
daily and gradually taper off to weekly or monthly as you build
confidence that good spending habits are taking hold.
Using tools such as Quicken or Mint.com can help in monitoring
"It's important to know exactly where all of your money is
going," Fox said. "You want to review your budget monthly or at
least quarterly so you can make adjustments."
Fox notes that monitoring is critical for
"You may wish to consider reducing unnecessary expenses," she
said. "Life insurance is not always needed at this stage. I am
not a fan of debt in retirement, so I urge clients not to upsize
their home and take on a mortgage."