Accurate Spending Categories
You need to have accurate spending categories to see where your money is going each month and where your areas of opportunity are. Some people over spend in their grocery category or their misc purchase category. These categories will be very unique to you and what your life entails. My categories range from pet medications to my daughters school fees to utilities for my home. It just depends on what you have going on.
Accurate Income Projections
This requires you to print out bank statements from at least 3 months and go through your income to get an average income to put on your budget. Some months may vary with different circumstances. If you are doing a new budget system currently but you have been laid off due to COVID-19 that would be a circumstance where you have zero control. You do however have the opportunity to pick yourself up and generate income by any means necessary.
Categories for Irregular Spending
This means a category for random things that come up each month or new subscriptions you’re paying for. Typically your budget will come in close to what you project but there will be times where you overspend at Target on clothes when your budget only called for groceries. This means you have budgeted for these things in that irregular spending category to cover times like this where you purchase many different types of things with one type of budget. Like going to Target for groceries and buying clothing at the same time.
Tracking Cash Purchases
Tracking cash purchases might not seem like a big deal but it is crucial to keeping tabs on all your purchases. If you are really trying to keep a close eye on your transactions then I would recommend getting the Microsoft Office Lens app for your phone and taking a picture of all cash receipts and then putting them in a folder on your phone or the Google Drive for safe keeping. This is great especially for self employed individuals to keep track of cash purchases and business expenses for tax purposes.
Plan for Major Purchases
You must always keep a list of ongoing goals whether they are short term or long term so you can incorporate them into your budget each month. You should have accounts called “sinking funds” for these goals.
7 Sinking Funds to Include in Your Budget:
- Important Birthdays/Events
- Car Maintenance
- Home Repairs
- Pet Expenses
- Medical Costs
4 Rules For a Successful Budget:
- Give every dollar a job
- You’re the boss. When you earn money, you prioritize how you’ll use it.
- Embrace your true expenses
- Turn large, less-frequent expenses into manageable, monthly bills.
- Roll with the punches
- Be flexible and address overspending as it happens. No guilt necessary.
- Age your money
- Consistently spend less than your earn, and be more than prepared for the future.
Those negative feelings associated with money will subside- the stress, anxiety, confusion, and shame gets replaced with confidence, calm, and even joy and excitement as you really start to feel in control of your money and tap into the potential of what it can do in your life.