Why Should "Budget" Be Your Favorite Word?

Usually no one wants to talk about budgets, no one wants to think about budgets, and no one wants to follow a budget. However, when looked at with open eyes a budget is actually a fantastic thing.

Here are three reasons why "budget" may become your favorite word:

Reason #1:

What did you spend your last $100 on? You may not remember. Maybe it was a pizza, or stickers for your children, maybe it went to piano lessons or a new pair of boots. The point is, many people have no idea where their money goes. A budget puts you in control of your money instead of your money controlling you. When you set, and follow, a realistic budget your cash is freed up so you can spend your money on things that are important to you and your family rather than spending it on purchases you won’t remember buying ten minutes later.

Reason #2:

There’s little worse than the stress money can cause. Debt causes tremendous stress and so does the fear that you won’t be able to pay your bills. It can ruin your health and it can destroy relationships. A budget can improve your relationships. When you form a financial plan with your family you work together as a team to reach your goals. The lines of communication are opened and the stress is eliminated because you have a plan and a team of support. Additionally, when you’re all on the same page financially there are no arguments about money, which makes better relationships with your spouse and your children.

Reason #3:

Some people don’t realize they’re living beyond their means until it is too late and the debt has become overwhelming and stressful. Most people would agree that it is better to live within your means than to get into debt. A sound budget keeps you living within your means and prevents or eliminates debt. A structured and realistic budget prevents the "Oops I spent too much on my credit card this month" mistake that we often make month after month until we’re paying more on our minimum balance than on our mortgage. If this applies to you, don’t let it get to this point. Take advantage of the power of a budget and gain control over your financial life.

There is absolutely no downside to forming a budget and we’ve only scratched the surface of the benefits they provide. Take a few minutes to realistically analyze your spending habits, your income, and your financial goals. I promise you’ll be glad you did.

Recommended: Guide to Family Budgeting

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Budgeting Doesn’t Have to Be Difficult

Do you equate family finance with tax law? Does it seem like an overwhelming concept to develop a budget you can live with? If this applies to you, take heart - budgeting doesn’t have to be rocket science! Here are five tips to make creating a realistic budget easy:

Tip #1: Think positively about your money.

Money, and budgets, are not bad things. In fact money is wonderful! Money enables you to have a wonderful roof over your head, to wear the clothes that help you tell the world who you are and what you’re about. Money buys education opportunities, cultural experiences, and money enables you to help others in need. You certainly wouldn’t think money was bad if you were giving it to Katrina victims or the parents of a child with a debilitating disease. So that’s the first tip to creating a budget – think positively about your money.

Tip #2: List the categories that you live by.

If eating out is a major part of your life then you’ll want to have a dining out category. If after-school activities are a large part of your child’s life and your family expenses then that is a category for your budget. Many budget forms have categories that won’t make sense for your lifestyle. If you want to create a budget that you can live by, that is easy to use and easy to follow, create categories that make sense to you and your family.

Tip #3: Be realistic about your income.

This is more difficult for self-employed individuals, commission based sales people or business owners, because business fluctuates. For regularly employed people with a regular and predictable pay check, your budget should reflect your current pay check – after taxes.

For folks dealing with unpredictable income, take a look at the minimum you’ve made over the past 5 years and base your budget on that income. This way, all your financial bases are covered. If you use the highest income you’ve made in the past 5 years then there may be months when you make less and your budget won’t work. The good news is that when you use your minimum average income you will often have extra money. Plan how you’ll use this extra money so it doesn’t get fettered away.

Tip #4: Set realistic financial goals.

Budgeting isn’t about tracking your costs and going without. It’s about setting and attaining your financial goals. It’s about success, not failure. Before you sit down to create a budget, take a few minutes to evaluate and document your financial goals. Do you want to save for a vacation? For college? For retirement? For a new car? What are your goals? Without goals, a budget is nothing more than a detailed checkbook register.

Tip #5: Plan for fun.

If your budget, and categories, are all about financial burdens, a budget will be painful to create and more painful to live by. Make time, and financial room, for fun in your life. If you love going to the movies, create a budget category for going to the movies once a month. If you absolutely love skiing or taking your children to the zoo then fit that fun time into your budget.

If you want your budget to be something that is easy to create and even easier to follow, follow these five tips. Making a budget doesn’t have to be a chore, in fact it can be tremendously empowering. Have fun with it!

Recommended: Guide to Family Budgeting