Here are ten tips that will help you achieve a successful budget:
1. Keep a record of every penny spent for one or two months prior to developing your budget. This will give you a realistic snap shot of current spending habits. Refer to these figures when working up your budget.
2. Use net income (after taxes and other deductions) for budgeting. Do not include anticipated bonuses, raises or income tax withholding refunds; these may not materialize.
3. Make a comprehensive list of all expenses that you regularly experience before you start budgeting for them. That way you won’t conveniently forget any when it comes time to allocate money.
4. Divide quarterly, semi-annual, and annual bill payments into monthly expenses for your budget.
5. Establish budget categories for unpredictable expenses (car repair, house repair, medical bills, etc.) and budget money for them monthly.
6. Budget fixed expenses first (mortgage payment or rent, car payments, loan payments, utilities, etc.); this money is already spent.
7. Consider savings as a fixed expense!
8. Fund a cushion (miscellaneous) expense category with 10% of your net income to cover unexpected expenses. This gives your budget flexibility.
9. Fund all expense categories before you begin to reduce funding in expense categories or cut out expense categories. This will give you a true picture of your current financial capabilities.
10. Set up simple records to track expenditures against budget and update them regularly.
Copyright 1997 K.C. Knouse
K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages