- Personal Finance
Budget Strategy Easy to Follow
Creating a budget is easy. Sticking to it is the problem. I'm sure like most, you've tried to figure out ways to save money, to cut costs and to stick to a schedule of spending money. The problem is, we just never know what or when the mood hits us and we're impulsively buying something we don't need.
But budgeting shouldn't be a painful exercise that forces us to live in a vacum, nor should it be so time consuming and tedious that its impossible to sustain. I've found that the simpler the strategy the more effective.
I've tried all of the approaches, from paying all of my bills up front, saving a set amount of each paycheck and setting a threshold for expenditures. But the truth of the matter is, that guidelines and rules are only effective to the extent they can be followed.
A simple solution to budgeting and success, is not in the details, but in the execution. So why make the execution some rule driven exercise of self will.
To make it easy, follow a few simple steps.
1) How much are your fixed costs. These costs include all of your bills....housing, car, insurance..etc....Conservatively estimate the high side of the ones that vary (electric, gas, water, etc) .
2) Subtract these costs from your monthly income
3) Divide the remaining income by 30 to find the money you can spend on discretionary items in a given day.
4) Once a week, take out and use only cash for that amount.
For instance, if you calculate that you can spend $40 a day, use this money for gas, for food, for going to the movies, out to dinner, etc. You'll find that on most days you don't spend $40 a day. On the days you don't spend $40, roll it over creating a buffer for the days you fill your gas tank and go out to dinner.
Over time, you'll learn the most important lesson to help yourself stick to the budget, and that is understanding where your money goes.
Its amazing to see how much that morning coffee runs you, or eating out for lunch every day at work. When you think about it, a $3 coffee 5 days a week, comes close to $800 a year on coffee. When you add up all of the little things we spend money on here and there, you quickly realize what is worth your money.
Keep it simple and watch your money grow and your life simplify by rolling back to the days when cash was king.