3 Keys To A Great Budget

Posted on January 26, 2014

This past week I happened to go on a date with a guy, who quickly said when we say down, “what’s your budget.” The date’s a story for another day, but the question he prompted still lingers. It got me thinking about budgets and the best way to implement them. That same week, my girlfriends and I had dinner and the topic of budgets came up again in conversation. All married friends, they began to tell me about their discretionary spending and ways they keep track. Some take out their allotted cash for the week from the ATM; some have a debit card where their allowance is solely transferred to that card.

But what makes a good budget? In my opinion, it’s the details and execution that make a budget successful.

Too often when working with people, they forget to include items such as dinner out with the girls or that monthly mani/pedi. To be effective, your budget must be inclusive of ALL your expenses (and income). I tend to use my debit card for all purchases as I can download the monthly activity and put it in my budget. For my business I tend to use one specific credit card (which I pay off at the end of the month) and track it for my budget. Whatever method you use, make sure it’s accurate and captures all your spending habits.

Implementation is also key. I don’t know how many people I talk with that have the best of intentions and start out each year with a budget, but finish the year in a hole. A lot of mistakes I see are people create an over the top and hard-to-use budget that doesn’t make sense for them. The easier you make it for yourself, the easier you’ll stick with it. To be honest, my budget is simply an excel spreadsheet. I have listed revenues (or income) and below that is my expenses to arrive at my bottom line. Sure I take it and do analysis for future projects I want to do or run a future savings plan (my what-ifs). Because of my busy schedule, this is a quick way to keep me on track and faithful. Find a way that works for you and your life in order to be successful at budgeting.

Like with implementation, a budget is only as good as the information you provide and you review. Let’s be honest, you created a budget because of a financial goal you had. In order to reach that goal, you are going to have to review and adjust your budget as necessary. Set aside a certain time each month (or each quarter) and review your budget. I set a reminder on my phone for a Sunday night after dinner each month. We aren’t perfect and as much as I would love to say I stick to my budget, there are months that I may deviate from the plan (and that’s okay). I simply look at my budget for the next month and readjust. There might have been an unexpected expense (like my dog Bentley eating something he shouldn’t have and going for the full work up at the vet) or in a great case, more revenue from your business you took in that month. Whatever the case, don’t get discouraged. Reevaluate, readjust and carry on.

So whatever your long-term or short-term financials goals, budgets are a great tool. Remember to be honest about them, implement them and review them. You’re sure to get there!