8 Big Picture Budgeting Tips

Photo by: auntsmack4u

Budgeting can seem like a mystery to many people, when it’s really very simple.  While this may seem basic to some, these represent principles that I describe in many of my other more detailed posts.  These 8 tips to help you develop a successful and realistic budget, can also help you to start thinking about your finances more successfully:

A budget’s primary goal is to result in ideal allocation of capital for yourself or your family. Oftentimes when we don’t pay close attention to where our money is going we wind up spending money in places we don’t need to and go without in places where we do.  This is simply inefficient.  Imagine for example if you wind up spending $100 on a nice dinner but then deny yourself a $100 kayak, which you would have much rather had.  Ultimately a budget can help you make sure that your money winds up where you want it.

Get your expenses in front of you. To start the budgeting process, get everything you can in front of you:  Credit card statement, bank statements, all your bills and anything else that gives you a picture of your financial situation.  The more complete your picture is of your expenses, the more likely you are to draft a realistic budget.

Re-examine your bills. One great way to help improve your budget is to look again at all your monthly bills.  For example, you might be straining to save an additional $15 per week and you might find out that simply by making a bundling agreement, you can save that much on your phone and television.  These kinds of savings can often come at no cost, or even with an improvement in your lifestyle.  You also should look at your bills with a mind toward capital allocation.   While $30 per month may not seem like much for a game you enjoy playing, would you rather spend that $30 on something else?  If so, reallocate your capital.

Make sure everyone in the family buys into and is consulted on the budget.  One of the greatest strengths of budgeting is getting everyone pulling in the same direction.  Think of it as the cost component of your family’s business plan.

Remember that time is money.  Saving money is like earning money tax-free.  So a penny saved is actually better than a penny earned.  With that in mind however, think about how much you are getting paid for the time you are using to save money.  If you’re saving $5 per week by making your own lunches and it’s costing you 4 hours, you’re not being paid very well for your time.  While budgeting is about trying to allocate your capital well, don’t do it at the expense of valuable time.

Credit cards aren’t always the enemy. It is conventional wisdom that if you want to get your expenses under control, you should cut up your credit cards.  I do not subscribe to this point of view.  As long as you do not carry a balance, credit cards can be a great way to get perks and convenience.   More importantly however, if you funnel the majority of your expenses through your credit cards then you have an effortless record of your expenses that everyone in the family can see.  It can become much easier to monitor your budget, if you have easy access to all your expenses.

Revise your budget monthly. Oftentimes we start out with an overly optimistic picture of our budget.  If you are not hitting your budget each month, look at your expenses and figure out why.  Update your budget to reflect unexpected expenses and, if necessary, offset them with cuts in other expenses.

Don’t sabotage yourself or your family. Don’t “forget” expenses or hide new purchases.  If you make a mistake or splurge, fess up and move on.  Setting up a pattern of self-sabotage is a surefire way to failure.

Ultimately budgets aren’t a way to give you discipline, but a plan in which to exercise that discipline.  Don’t expect a budget to solve your finances if you haven’t committed to working at it.  If you are committed, a budget is a valuable tool in helping you get where you want to be.

6 Responses to “8 Big Picture Budgeting Tips”

1. Fitz says:

   July 5, 2009 at 6:06 pm

   I agree, one should always consult with the family when it comes to budgeting. It’s a “team effort”, something that everyone at home should be a part of.

2. Sunny says:

   July 7, 2009 at 10:24 pm

   Nice post. There’ so many way to save money. I start looking more closely each of my invoices. I realize that for one of my credit card, I was paying around 30$ in insurance. As soon as I notice, I cance the insurance, because in my case, I really didn’t need it. Over a year or so, savings will be huge for me.

3. jay @ work at home says:

   August 8, 2009 at 8:37 am

   Revising your budget is absolutely important when you are trying to save up for different ventures. It’s mainly the small things people are missing when watching how they spend. Awesome post on this matter.

4. Mack jackson says:

   September 7, 2009 at 5:32 am

   Ya i totally agree with all points, especially always have list of your expenses, according to me if you are using credit card then always check statement.

5. Kate says:

   December 24, 2009 at 7:50 am

   Yes, i agree with the points that you have discussed. As to your introduction, budgeting is very difficult for me to do specially when there are unexpected instances that arises that will eventually need a money. I hope i can follow this one! Thanks.

6. love poems & love quotes says:

   January 1, 2010 at 9:52 am

   Time is money…..that’s true. There is always timing in your field no matter what it is.