6 Ways to Create a Budget and Stick to it

Many people are experiencing money problems in the current economic climate and it’s easy to feel like things are spinning out of control. Some may want to get their finances under control, others may be saving for something and there are those that want to pay down their debts. A well planned and executed budget can be an excellent tool to help you deal with all these problems. But, creating an accurate budget and sticking to it can be a significant challenge. In this article, we will break this process down into six easy to follow steps that should help to flatten the learning curve. 

1.Check Your Spending

Before you can create a budget you need to fully understand how much you’re spending each month. Gather your bank statements and credit card bills and go through the paperwork to find a monthly total. To make the process easier, divide the spending into broad categories, such as: mortgage/rent, food, utilities, healthcare, clothing, entertainment and others. 

2.Set a Realistic Budget 

At this stage, you should now have a better understanding of what you’re spending and where the money goes. This will be helpful to create a realistic budget that you can follow every month. Certain expenses are fixed, you won’t be able to do much about your rent or mortgage payments unless you move to a cheaper place or remortgage. But, there are many costs that can be lowered and this will give you some wiggle room to create your budget. Think about your budget as a long-term project that you will need to follow and it will be easier to be realistic. Some people simply set their clothing budget to zero, but everyone needs at least some money for work clothes, underwear, socks and other essentials. The best places to start cutting costs are unused subscriptions for services that you either don’t need or that you’re using much. 

3.Tracking Spending

The budget should be seen as the first step in your budgeting journey. To make it work you will need to track your spending to ensure that you stick to your budget. Initially, this will be difficult because it’s surprising how much we spend when we’re not thinking about our finances. Some people adopt a low-tech approach to this problem and they keep their cash in separate envelopes for each spending category. This isn’t the most practical solution if you don’t use much cash, but it does engender good spending habits. It’s important to keep all your receipts that can be added to a digital or written spending tracker. Tracking your spending each month will help you identify areas where you tend to overspend. There may be spending triggers that can be avoided with proactive action. For example: perhaps your spending more when you’re out with friends and a lower cost activity could be the solution. Consider hosting a movie night at your home, a board game night or a potluck dinner. There are plenty of ways to socialize and entertain without breaking your budget.

4.Keep Your Budget Up to Date

Over a prolonged period of time, it’s easy to lose sight of your goals or become disheartened because you’ve started to overspend again. The best way to avoid this problem is to regularly review your budget to ensure that it’s up to date. Let’s be honest, prices seem to rise regularly and your budget can soon be out of date. The spending goals can become unrealistic leading to frustration and financial hardship. Look at all the costs every few months to ensure that your budget is still realistic. Don’t forget smaller costs, such as food, gas, public transportation and more. Even if the costs have only increased by a few dollars here and there, they may soon add up to more than you expect. 

5.Look for Savings

Many people believe that they're on a very tight budget, but they always seem to find some extra wiggle room if they are in dire financial straits. Most of us don’t want to live a frugal life devoid of any fun and this would be impossible to maintain for long anyway. But, if you take a deep dive into your monthly spending it’s likely that you can find some areas where you could make savings. This may only be a few dollars here and there, but it could add up to hundreds of dollars in savings across an entire month. In many cases, this can be as simple as good meal planning for work, school and home life. Think about how much you may be spending on the morning coffee run or eating out on work days. Now imagine how much you could save if you made your coffee at home and prepared your own healthy packed lunch. Another great tip is to look at your streaming services to see if you're using them regularly. If you are streaming a show with one service, you may want to binge watch that show and then rotate to a different streamer. This means that you would only be paying for one streaming service at a time and you’re likely to get offered incentives to sign up again which could save even more money!

6.Make More Money

If you simply don’t have sufficient money coming in to cover even a modest budget, you can solve the problem by adding some extra income sources. This could be as simple as selling some stuff that you’re not using or you could start a side hustle. Gig work can be lucrative if you have a smartphone and some spare time. Some people turn their hobbies into a paying gig, such as blogging, writing, video editing and more. This can take a little time to get off the ground and it should be considered a medium to long-term project. If you work hard and you’re really lucky, it may be possible to turn your side gig into a lucrative full-time career that you enjoy.