Finding Your Personal Budget Strategy

Saving money by creating a personal budget is less painful than the fallout of not having a budgeting strategy at all.

It doesn’t take an economic crisis to make it clear that everyone needs a personal budget plan. Saving money is a habit most people say they will try to follow in their lives.

With these tips, you can create a smart budget approach to get your financial house in order.

Record your spending
Begin the budgeting process by knowing what money is coming in each month; your paystubs should help you establish that baseline. Then, you can begin to record all of your spending. This detailed process may be a little painful, but there’s no other way to get a handle on what’s going out every month. Pay close attention to those set monthly expenses and chart how regularly “splurges” are happening. You’re looking for patterns with an eye toward cutting costs.

There are endless apps, programs and blogs devoted to saving money by tracking what you spend and counseling responsibility about handling money, in general. Whether you use a program like Quicken, an envelope method like “Budget,” or a simple spreadsheet, you must record every single expense—cash, check or charge. Remember that our biggest expenses are often unanticipated, such as replacing a broken television, getting the car fixed or taking a vacation with friends. “Unanticipated” can mean simply that you didn’t save for an item, rather than it took you completely by surprise. But all that’s about to change.

Come up with a nice round number for the big-ticket items you purchased during the last year. Whether it’s $500 or $1000 or more, hold on to that figure for a line in your personal budget planner. You can call it “emergency fund” or “surprise expenses,” and from now on, you’ll be saving to cover for just such costs.

Trim the fat
When you know what you receive and what you typically spend, then you can begin to see the areas where you might find savings in your personal budget. Now it’s time to get down to business!

Go through each expense item in your ledger, starting with those that have a set monthly fee. Contact your phone, cable and Internet providers to see how to reduce your plans. If you’re paying for water and electricity, your rates may be set, but gas companies are in constant competition with each other, often providing cash incentives for changing services. Next, try your credit card company to see if you can negotiate a lower interest rate. Make strategic plans to pay off any credit card balances as soon as you are able.

Go on a spending embargo
While it’s true that most of us could reduce our regular monthly expenses by comparing service providers, the areas where many people could really be saving money are in those innocent-seeming small expenses (to-go coffees) and the “justifiable” bigger ones (‘It’s on sale!’) Going on a spending diet for these types of purchases requires control and discipline.

Like any muscle, the one for frugal spending can be worked and strengthened. Going a few pay periods with money left over can be its own reward, giving you the motivation to keep up the hard work. But if you feel like you might be tempted to fall back into your old habits, go ahead and make your new approach more formal. Come up with a time period—12, 18 or 24 months, for example — and put “buying embargo” into your calendar as a reoccurring event. Just seeing those words as you check your schedule can be the extra reminder to help keep you on the “no spending” straight and narrow.

Enjoy the rewards
Thinking hard about handling finances is something many of us try to put off, right up there with scheduling our next dental appointment. The fact is that saving money by creating a personal budget is far less painful than the fallout of not having a budgeting strategy at all.

Remember the golden rule of successful budget saving: spend less than you bring in! As you set aside funds each week or month for your expenses, be sure to take out a percentage for your emergency fund. As you see your savings grow and your debt shrink, you’ll feel the confidence and control that keeping to a personal budget provides.

Enjoy that you’ve switched over to the frugal side. It’s a habit you’ll never want to break, once you’ve established it.

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