This is a reader question from Betty, pasting only the relevant section here.
“My big problem is we can’t stick to our budget. we always overspent every month. as a result we are not able to pay our student loan debt early”.
I do receive a few reader questions but, I always respond to their mail. This is the first time I chose to answer Betty on the blog. I thought this would be helpful for other readers as well who are in similar situation.
One disclaimer that I don’t set a budget. Setting money aside for investing, as soon as the salary comes in, is my way of living on a budget. That way we know exactly how much we have towards living expenses for the month. We do not set fixed budget for food, grocery, entertainment as such. What we have is the total kitty.
I know some people are very good at budgeting and they prefer it that way. If you are one of them I encourage you to live on budgets. If that saves you more money, then be it your way.
So Betty, you may not have a budget with set amount for every category. If you don’t, try setting aside targeted saving in different accounts when the paycheck comes. Spend rest of the money on whatever way you can.
Now if that doesn’t work for you, or you do prefer budgeting for each categories of expenses, then here’s some tips on how to stick to your budget.
Creating a budget takes a lot of time, we do it and somewhat feel as if the work is done. We get relaxed afterwards. We think once budget is created, it is easier to follow it. We do not give it a second thought or even a brief re-look at times, as the days pass-by.
We procrastinate till end of the month is reached. When the month-end comes we find ourselves in negative territory or overspent territory. this increases our fatigue, this may cause friction within family. I have seen this in my childhood. Financial worries are our biggest worries.
If you are as worried as Betty, you should make every effort to be within your budget. You should follow your budget thoroughly. Remember, keeping up with the budget is not an easy task. This is about habit and discipline.
1) Allocate sufficient fund: Most probably this is the reason you are not able to stick to your budget. What’s the possibility of your budget being wrong in the first place.
Check and re-check our budget. Tally with last few month’s spending categories and re-evaluate your budget. You may need to add a few new categories and or increase allocation on few things. In the past, you may have gone to theaters but hadn’t budgeted for movie expenses.
You should keep the sufficient money reserved for must-have things. If you allocate less money for essential ingredients, you are bound to overspend. Create your budget carefully, if required, sit again on your drawing board.
2) Learn to adjust: This is most important step in maintaining budget. You should learn to adjust with funds you have. Suppose if in a monthly budget you have allocated $600 for food, then you should always try not to spend over $20 per day on food. Sure, there will be days when you may need to overspend, but be ready to adjust later if you do. A few days of brown bagging your lunch may bring food budget within limit pretty soon, after an expensive dinner with wine.
3) Take help of tools/specialty sites: Many software are available, which help you in maintaining budget. You can create your budget using it. As you spend money, you will have to enter it in the software. If you cross your budget at any point, the tool will alert you. So, you can spend money more accurately according to your budget.
4) Take help of friends: You can ask your friends to help in maintaining your budget. First, you can take tips from them. Second, you can exchange your budgets, keep an eye on your friend’s spending in return he/she does the same thing. You both warn each other if anyone of you is deviating from the budget. This will bring a lot of fun in the process and also will help you sticking to your budget.
5) List low-cost and alternate ideas: Often, the reason of crossing budget is excess spending on entertainment. See if you can make a list of low cost or free entertainment alternatives. You may get the same value with less money if you do. (Related – Enjoy Life at less cost, take staycation, Best travel advice I ever received)
6) Be firm once budget is prepared: Impulse buying is another big Budget Crasher. We buy things on momentary urge and then never/rarely use them. Next time you feel the urge of buying something, you should look at your budget first. Check if the money required is provisioned in your budget.
If you have excess money than budget allocation, and if that good/service is affordable using excess money, then you may buy it. If you don’t have excess money to purchase, you should not go for it.
7) Keep reviewing your budget: you should review your budget regularly, ideally once every two weeks. By doing this, you can catch deviation early and thus quick amendment becomes possible. You may adjust your budgetary allocation while reviewing. For example, if you spend $30 more on a category, you should deduct $30 from another category.
Readers do you budget and what’s your secret formula of sticking to it? I believe that once you make sacrifices to be within budget it becomes part of daily routine and soon you don’t feel like giving up.