Three Keys to Your Budgeting Success

By: Sergey Rusak

For many people, the word "budget" has a little bit of negative connotation. But, without a budget many families struggle each week, literally living from check to check. A budget is the only way to ensure that you stay one step ahead of your monthly bills.

Budgeting involves understanding how much you earn and spend over a particular period of time (week, month, year). When you create a budget, you are creating a plan for spending and saving.

What makes a budget a good one? A successful budget is one that is well planned. Here are a steps to help you create your own successful budget that you can live with:

1. Categorize Wisely: Many people use software packages or pre-formatted budget sheets to start and understand their budget without much long term success. Choose categories that fit your own personal situation and your habits, not a generic sheet or list. The key to categorizing is to choose enough categories to paint a realistic picture, but not too much detail that the budget becomes a burden.

2. "For a Rainy Day" Expenses: Be sure your budget includes unexpected spendings. For instance, car repairs, medical bills, household items. These expenses can sneak up on you and leave you tight for cash. In addition, your budget should allocate some money towards a savings plan every week and month. If you do not set aside money specifically for investment purposes, you never will.

3. Re-evaluate Your Spending & Set Realistic Goals: Budgeting is not simply tracking costs; it is about setting financial goals and finding ways to meet them every time. Instead of struggling with an unrealistic plan to save thousands of dollars, simply learn how to spend better and wiser. After all, spending is what we do most, and spending less is easier than saving more. Smart spending is better than cutting back and doing without, but remember that you still need to know where your money is going.

In the end, a budget will tell you whether or not you are living within your means. Before the unlimited use of credit cards, you could tell if you were living within your means because you had money left over after paying your bills! The use of credit cards has made this much less obvious. But, by creating and adhering to a realistic budget, you'll improve your cash flow, free up money that you didn't think you had, and more importantly, you'll have a plan. Sure, we all get caught off guard every now and again with a surprise automobile or home repair. But, if you don't set up guidelines for reaching your financial goals or a means to measure your progress, you may end up going so far in the wrong direction you may never get ahead.