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5 Personal Budgeting Tips

May 3, 2017

A woman cheering as she looks at her spreadsheet.

Budgeting is a bad word to many people. Budgets are often associated with taking fun things away and being stingy. But it doesn't have to be that way. Used correctly, a budget is simply a tool to help you take control of your finances and achieve your financial goals. And whatever those goals are, these five personal budgeting tips can help you get there.

  1. Learn your habits

Learning your habits is especially important if you've never budgeted before. You can't make a budget unless you first understand where your money is going. Keep your receipts and organize them into categories like food, rent/mortgage, utilities and entertainment. Once you have a better understanding of where you're spending your money, you can establish amounts for each category much easier. And once you decide how much to allocate for each category …

  1. Write it down

Unless you've got a photographic memory, you're probably not going to remember your limits and every single purchase you make in a month. Whether you're using an app like Everydollar, a spreadsheet or even the old-fashioned pen and paper (it works!), writing down limits and expenses helps you remain accountable to yourself and further understand where your money is going. It will also help you understand how you can utilize your money better. For instance, once you have it down on paper, you may realize you're spending way too much on food, prompting you to plan ahead and cook at home more.

  1. Don't cheat

Especially at the beginning, it's easy to think you don't need to note that gas station run you made during your break, or ignore the cost of lunch with coworkers, just this once. Don't do it! That's how budgets never get off the ground. It's critical that you keep track of every single expense, no matter how small or infrequent it happens. Not only will this make it more likely for your budget to succeed, but it will help you establish habits with your money. This way, you won't hit the end of the month and wonder, "Where did all my money go?"

  1. Adjust as necessary

Your first budget shouldn’t be your last. You'll of course want to make adjustments if you change jobs or get a raise or even, heaven forbid, get a pay cut. But don't forget to adjust things outside of those events. Once you're on a roll with your budget, you may realize you're cooking at home more and don't spend as much on food, for example. If so, congratulations! Go ahead and shift that allotted amount to a different section like entertainment or car payments. And if you just completed a car payment, you can shift all that budgeted money to something else. Or, treat yourself for your success!

  1. Have an "oops" fund

A budget should be strict. Otherwise you're not being accountable to yourself, and your finances may spiral out of control. However, a budget should also be realistic. Emergencies happen. Clothes unexpectedly tear. Cars break down. Family members get sick. And that's why, if possible, it's a good idea to build in some wiggle room to your budget. Keeping it in a separate section allows you to save a little while remaining strict on the other categories in your budget. Don't be afraid to use it when the need arises.

Budgeting is hard work, but the results are immense. Once you understand where your money is going and commit to be accountable to yourself, your budget will help you achieve your financial goals.