Nobody likes budgeting but the truth is that it is indispensable. I have tried simplifying budget using several ways and I have been able to learn a number of things. These rules shortly outlined will guide you towards excellence when creating budget no matter what type of budget it is. Below are some rules you need to put to mind.
Do not aim at perfection
Budgets are targets and therefore you will simply not perfection in it in the first three months of its application. All you have to do is to try as much as possible to get close to the budget if you cannot attain perfection in it. You can also adjust some necessary variables as much as possible.
Do not exert your entire energy on minor issues
You can leverage small benefits like coupons and shopping at sales but if you want to hit it big, you should aim at the big things. When buying a house, you should be very smart in order to save some money. This will help you to have enough money for fun.
Do not budget on ideals, budget on the real things
Wishful thinking does not have any place when it comes to budgeting. The raise you are expecting in your salary should not be included in your budget until it comes.
Make a simple budget
Complex budgets are really confusing. They make you confused on the processes and in the end of the day you may even go negative. It is important to monitor the details you need alone and avoid other things. Complex budgets fail because of the lots of maintenance and care needed to uphold them. As a matter of fact, try as much as possible to avoid complexity in this process.
Elizabeth Warren and her daughter Amelia Warren Tyagia proposed an astounding principle of budgeting in their book “All Your Worth: The Ultimate Lifetime Money Plan”. The budgeting plan proposed by the team involves three major subdivisions which include: your needs or must-haves, savings and then the wants. The money formula propounded by the team is indeed a balanced one and it suggests dividing your money in a wonderful order that will ensure that you make the most of it. Below are some takes on this.
- Set aside 50 percent or less for your needs
Your needs or must-haves are the things you need to spend on and without them you will not be able to live in the modern world. Such things include utilities, housing, healthcare, insurance, food, clothing and transportation.
- Save 20 percent or more
Savings here include emergency savings, retirement accounts, and lots of other things you need to invest into. Debt repayment can also be included in this category.
- Set aside 30 percent for your wants
This category involves every other thing you might want to spend money on besides the first two. It includes entertainment, cell phones, haircuts, pet supplies, travel and so forth.
You should aim at reducing your needs and increasing your savings continuously until they reach a maintainable level. If you are able to successfully do this, you can now spend the remaining money on your wants as much as you want. Fun becomes much more interesting when you are sure you can afford what you are spending on. I was really liberated on discovering this formula. The formula is very simple and therefore I do not have to leverage lots of countless money saving tips out there. More so, I could customize it as much as I want as I further divided the categories to track some things I want to track like vacation, spending and so forth.