Developing a habit takes time and effort, but you can make budgeting a habit using these methods. Be sure to read Successful Budgeting Starts with Goals and Resolutions to learn about fundamentals to build good budgeting habits.
How to Form the Habit of Keeping a Budget
Getting into the habit of keeping a budget takes four to six weeks of working for a few minutes each day on your budget by recording expenses, planning for the next few months or doing any budget-related activity. Schedule 15 minutes each day to focus on your personal budget, although you may find that some days you only need to spend 5 minutes on your budget and other days you may want to spend 30 minutes doing more in-depth budget planning.
Many people find keeping a daily spending journal helps them to develop good habits. Dedicate a simple spiral notebook to being your daily budgeting journal and use it to record budgeting successes like resisting temptations to spend money on items you would rarely use or do not need. Record your failures as well, such as failing to plan for quarterly taxes or caving in to the temptation of stopping off for fast food instead of eating the meal you planed. When you record a failure, you also need to write down what you would do differently in the future to avoid repeating mistakes. As you write in your budgeting journal, let yourself visualize successful outcomes. Remember that we become what our minds see and you must dwell on success and not failure.
Realistic Budgeting
Although you must cut expenses whereever possible in your budget, avoid setting unrealistically low budgeted amounts. If it is important to you that you get out to see a movie once a month, then budgeting $5 per month for entertainment may leave you feeling deprived instead of delighted with your budget.
You may be in a difficult situation financially where you can only spend money on absolute necessities and you need to cut out some non-essential activities that mean a lot to you. You may thoroughly enjoy seeing that movie once a month but you must cut this activity out due to loss of income or to pay down debts. In this case, plan to add the non-essential expense back into your budget after a few months. Knowing that you will be able to enjoy yourself again soon will keep you motivated with your budgeting, and you might find a less expensive alternative during the time you are doing without.
If you are going to be successful with personal budgeting, you absolutely cannot spend more than you make. If you have outstanding debt, you must start paying if off and you cannot spend money you do not have unless faced with an extreme health emergency. If you need to reduce debt, incorporate these six steps to getting out of debt into your personal budget plan.
Start Budget Planning
Now that you are on your way to making a personal budget a habit, you can start gathering information to create a budget to use to guide your spending and saving.
You need to know what your expenses are to budget for them, so if you have not been keeping receipts, track expenses for a few weeks to get accurate budget amounts. You can do this by keeping a notebook with you to record how much you spend every time you open your wallet. Yes, record all spending, even if it is $1 for a bottle of water or a quarter for the parking meter.
You can determine what some of your expenses are right away. Your electric and gas utility can give you billing reports for the last year or so, and you most likely can get these reports from the utility's web site. If you pay property taxes, life or auto insurance or a water bill you probably have these expenses recorded in your checkbook register. If not, make some calls and find out how much these annual, semi-annual and quarterly expenses are.
Once you have your income and expense documentation, create a budget on paper, or use a budget spreadsheet or financial software to create a budget. Using a spreadsheet or software for budgeting has the advantage of allowing you to easily adjust different expenses to easily see how your budget is affected, but you can do this on paper with a pencil and eraser as well.
