Starting A Personal Budget – Mantras For Success
My first personal budget was made two months ago. Yes, it wasn’t not too long ago that I took the initial steps towards budgeting. It was the best decision I have taken in a long time. From those baby steps, taken tentatively, I have come far. In just two months I feel like a changed person.
Today, I know precisely how much money I am spending, and what I am spending it on. At the end of the day, as I add every single expense to my budget, I take a moment to reflect on the transaction, and how I feel about it.
I have actual data to look at and change my spending if required. In short, I already feel empowered and in control of things.
Most articles about How To Start A Personal Budget will tell you about the actual process of budgeting – defining your goals, knowing and listing all your different sources of income, keeping track of your expenses, Knowing these steps is essential to be able to budget but how do you get yourself to overcome your hesitation, lethargy or inertia.
Starting is only half of it. It is equally important to keep your habit going. How do you do that? Read along.
Personal Budget Success Mantras
If you feel lost about your money, if you do not know where it disappears, I would urge you to:
Take the Plunge:
Just start doing the damn thing. If you feel daunted by the prospect of budgeting, starting the process will help you realize it is not as complicated or scary as we make it out to be.
First List Down the Categories:
Getting your categories down will make things easier. You can start with a generic list and make it your own as you go. Lots of these lists are available on the internet – here is one to get you started.
Keep it Simple Silly:
From the categories you choose to the process you have – keep it simple. Complicating things will result in frustration.
Once I had my initial categories set out, I made sure I entered my transactions daily to ensure I did not forget anything.
I keep all receipts till I have entered them into my monthly household and personal budget. After that, I keep only those that have a warranty attached to them or may be required for exchange. These go into little envelopes, one for each month. Simple!
It was only after I had entered all transactions regularly for two weeks that I first reviewed my budget and made a few course corrections. A couple of new categories were needed. I wanted to add ‘vacation’ as a new budget head.
I did a similar review of categories at the end of the first month. In addition, I made changes to the amounts I budgeted for categories so that they were more in line with what I actually spend. I am happy to say that the second-month expenses were pretty much in line with my targets. I did not overshoot any category significantly. Nor did I have to change amounts budgeted for month 3.
Your budget will evolve:
No personal budget is perfect. For the first few months, your budget will constantly change and evolve, a lot. When I made my first one two months ago, I had nothing to go off. So I allotted amounts to each category based off a sheer gut. While I was close on some, I was way off target on others.
There were some categories which I added as I went along, and some that I did not have at all in the first month. Then there were large expenses that I did not budget for at all but started doing so from this month on wards – like setting up a Christmas Fund. Give your budget a chance to fix itself.
First things first:
Initially, all you will seem to be doing is tracking your expenses according to categories. And that is great. You need to know how much you are spending in various categories to decide what changes you need to make to your spending pattern, or if you need to earn some more income each month.
When you are allocating amounts for each category, make sure you are not planning for a lifestyle that is not true to who you are and how you live. If you like to (or need to ) eat out a few meals each week, do not cut down the expense to zero. Do you indulge in a daily latte? Think if you can actually manage without your morning cuppa before you make changes to your budget.
Allot amounts for discretionary spending – clothes, fun, and entertainment. You can not go without them for months on end.
Focus on the process:
Budgeting is a process that helps you understand yourself, your expenses and your lifestyle. There are many tools that help you with the process from spreadsheets to online tools like EveryDollar. I use the free version. (Nope, this is not an ad. I happened to stumble upon it, started using it and have grown to really like it) Whatever tool you use is fine as long it helps you with the process and helps you understand yourself better.
Notice the trends:
Give yourself a couple of months, and you will see patterns and trends emerge. I noticed a few things about myself that I was not aware of and was pleasantly surprised by – things like my monthly grocery bill is just about $150. You will find expenses which you can either eliminate or cut down upon by substituting them with better choices – walking instead of driving, what with oil prices soaring. Also, who wouldn’t want to walk in this lovely fall weather – right?
I am delighted with my new habit. The benefits are obvious – both monetary and otherwise. It has been a great learning experience for me. I look forward to seeing what trends emerge after I complete a year – which months are more expensive than the others, how does my fuel bill rise over time and what I can do to control it.
Do you track your expenses and do a formal personal budget? I would love to know what benefits you have seen from the process.
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