How to Create a Budget You Will Actually Stick With
Most people know, on at least a rudimentary level, how to create a budget. However, creating a budget that you can stick with over a long term is a completely different story. If you find that you have a hard time staying within a budget, the budget might be to blame. Here is a short guide to making a budget that will be easier to follow.
1. Learn to Love Your Budget
For many people, a budget feels like an unnecessary restraint and even a punishment. However, a budget is just a way of working toward your financial goals. Whether you are saving for a home or merely trying to avoid credit card debt, view your budget a tool and a choice rather than an arbitrary set of rules.
2. Make a List of Expenses
The next step in budgeting is to list your expenses. While this may seem easy, it is where so many people sabotage their budget. Many people budget for more expenses than they can afford, leaving themselves in a financial crisis mode even when following their budget. Others don’t budget for enough expenses (like entertainment and vacation savings) and end up feeling so deprived that they give up on budgeting. Find a middle ground that allows some freedom but stays within the boundaries of your income.
3. Give Yourself Rewards
It is human nature to respond positively to rewards. You will have an easier time sticking with a budget if you view it as a game with a prize at the end. Choose a reward that is affordable but still pleasurable and plan to give it to yourself after a certain amount of time staying on budget.
4. Don’t Forget Savings and Emergencies
Many people forget when budgeting to leave a sizable portion of their income for both short and long term savings. Ideally, you should be prepared for emergencies like car repairs and broken appliances while also saving long term for things like retirement. Include these in your budget and you will be prepared for whatever challenges life brings.
Following any budget will take discipline and planning. However, these four steps will help you to plan a budget that is easier and more rewarding to implement.
Written by: Vardan Pogosian, Pogosian & Company, CPA
About the Author:
Vardan Pogosian was a former IRS agent for over 9 years and now a CPA in Glendale, CA. Pogosian & Company, CPA provides professional tax preparation and tax planning solutions to individuals, small businesses and larger corporations.