Crafting Your Perfect Budget

Don’t Let Obstacles Stand In Your Way of Crafting Your Perfect Budget

When it comes to putting your finances in place, creating and sticking to a budget is pretty basic advice, and for good reason. A budget can help you track and manage your spending, create an emergency fund, swiftly pay off debt or reach your savings goals all while making sure your regular, monthly expenses are paid in full and on time.

What’s more, to help you on your way to financial control are several types of budgets for you to consider and decide which might best fit your needs, goals and lifestyle. However, you might find when choosing or creating your budget that certain obstacles, many of them unexpected, might present themselves – and stand in the way of a workable budget.

So what are some common problems? Let’s have a look at my top six:

  1. A spouse or significant other fails to keep to the budget. There’s nothing worse than coming up with a solid financial strategy that puts you on the road to meeting your money goals . . . only to have your special someone sabotage you and derail your efforts.
    To remedy this, you need to sit down and have a frank conversation about your financial responsibilities and common goals. Identify each person’s strengths and weaknesses: Is one person likely to overspend while the other avoids extravagances at all costs? Make compromises. And, be open to revisiting and possibly revising your budget each month as different financial priorities come up. The trick is to be honest with each other so you’re on the same page when deciding how to spend and save your money.
  2. Holiday spending. The holiday season is right around the corner, and that means gift buying, party going, and other merriment. If you plan on getting in on the festive fun, consider adjusting your December and January budgets to accommodate holiday-related spending. That could mean keeping bundled up in layers instead of cranking the heat to save on gas and electricity bills. Or it could mean nixing all eating out for a few weeks. You could save money by whipping up baked goodies instead of breaking the bank on big-budget gifts. For holiday cards, think homemade — or “pass” on the tradition all together. Try raiding a friend’s closet for a new look instead of heading to the malls, which will surely be packed and likely not much fun anyway.
    But remember, no gift is worth going into debt over, so if you don’t have the cash on hand, it’s best to give that item a pass and find something you can truly afford.
  3. Not personalizing your budget. Everyone’s finances are unique, and individual budgets should reflect that. Unfortunately, there’s no secret formula, so you must expect some of your budgeting to be trial and error. Learn from your mistakes and incorporate fixes or safeguards into your new budget. And, of course, be flexible when unexpected expenses crop up by being aware of the wiggle room in your finances. If you know ahead of time where you might be able to pull extra money if the need arises, you’ll be less likely to spend more on those items than budgeted.
    It’s also important that your budget reflects your long-term goals. If it doesn’t, your chances of sticking with your plan are slim.
  4. Irregular expenses. These are tricky, no doubt. However, as you know they’re likely to surface, you can prepare. One way is to devote a budget item each month in the amount of $50 or the most you can reasonably afford. Every month the money isn’t spent it can be moved to a separate account, that way you’re not tempted to use it. Another strategy is to add up your known expenses that come but a few times a year, like annual memberships or car insurance premiums, and divide the amount by 12 so you know exactly how much to stow away each month.
  5. Emergencies. We don’t want to think about them, but they’re a fact of life so it’s best we arm ourselves. Most financial experts recommend having at least $1,000 in an emergency fund to cover things like unexpected medical bills, car repairs and the like. In fact, when setting up your budget, it’s important first to set aside whatever emergency money you can before contributing to long-term savings. I know it’s difficult, but you don’t want to find yourself choosing between paying your light bill or taking care of your kid’s broken arm.
  6. Feeling like you’re broke, stingy and no fun living on a budget. This problem is mental, but it’s a sticky one nonetheless. For many folks, the thought of budgeting their money is akin to limiting their food intake – it’s a drag. But the truth is, knowing where your money is going and how well it’s working for you and your long-term goals offers you a great deal of control, which a satisfying and, dare we say, fun feeling.

What’s more, saving and achieving goals which allow you to take that awaited vacation or buy that designer purse without resorting to using a credit card is its own kind of stress-free fun. And remember, no one can accuse you of being cheap when you’re sipping beverages during a beach getaway you paid in full before you even dipped your toes into the water.

Here at American Credit Foundation, we get it. We know that budgeting, taking control of your money, setting up a healthy savings and planning for the unexpected is tough, takes time to master and you may trip up a time or two. So if you find yourself needing additional counseling or guidance, the team at American Credit Foundation is on hand to help you sort it out.

Click "More" for important American Credit Foundation client transition information