If you are planning on being successful with your finances this year, you and a written budget should consider becoming very familiar with each other.

I wish there were an exception to this process, but your spending plan IS your roadmap to financial success.  Every month, I conquer my battle against financial distress by creating a budget.  It’s my battle plan. 

Many times we get discouraged after we attempt a new process only to be stopped dead in our tracks by roadblocks.  Are these roadblocks meant to be a dead end?  No.  A roadblock is an action or condition that obstructs or hinders progress toward an objective.  Very important words – obstructs or hinders – not stop. 

If you’ve tried budgeting before and it didn’t work, consider giving it another attempt.  You remember what W. C. Fields said, “If at first you don’t succeed, try, try again.”  Your first budget may not be or may not have been perfect, but I hope the suggestions below will help to lessen your learning curve and help you become more confident with your money management process.

Balance your checkbook.  Before you can start your budget, you must balance your checkbook so you will know how much money you have left in your account to spend for the rest of the current month. 

Now you can create your plan for the next month.  Because a budget is a “monthly” cash flow plan, you have to try your best not to spend any of the new income you receive within the month.  This money will be used for budgeting next month’s income.  For example, today is January 7th and I just created my first budget.  My pay dates are January 15th and January 30th.  The money received on the 15th and the 30th will be the income used for my February budget and spending.

Carry a notebook everywhere you go.  This is a tedious process, but it can help you to estimate dollar amounts for your budget categories.  After creating your initial budget, make it a point to write down actual amounts you are spending for each category.  Compare those numbers to your budget estimates.  Are your estimates too strict?  To loose?

Include a mandatory “blow” money category. This area can be your lifesaver.  The blow money category relieves you of surprises and  small instances of overspending.  You place money in this category on purpose to alleviate these financial surprises.  The amount varies depending on your income and your spending tolerance.  You can thank me for this advice later.

Prepare for Lump Sum payments.  These are non-monthly payments which can put a snag in your entire plan if not accounted for.  The answer?  Convert them into monthly savings to avoid strain when the payments are due.  For example, your auto insurance is due in June with a payment of $550.  Since we are currently in the month of January, you have five more months to save up for this large payment.  To calculate the monthly amount to set aside, you would use the following calculation:  $550/5 = $110.  So, you must allocate $110 each month in your budget for auto insurance.  This example holds true for ALL lump sum payments (ex. Real Estate Taxes, Homeowners Insurance, Home Repairs, Medical Bills, Tuition, Vacation, Christmas, etc).

Be patient and flexible.  Just as Rome wasn’t built in a day, your budget won’t be perfect in one day, but it will be your guide for spending.  You may at sometime during the month have to change the budget, but it still has to balance zero. For instance, if you have an unexpected expense that requires a $100 payment, you will have to adjust the budget to spend $100 less in another category.  This will keep your budget balance at zero instead of $100 negative. 

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Will you still have to encounter speed bumps?  Probably.  But when issues arise, you will be better equipped to handle them.  Don’t waste time on minute details.  There are plenty of resources available to you to help you reach your financial goals.  Feel free to ask questions.  Matter of fact, I encourage them.

Tell us about your budget bumps or successes in the comments.  We’d love to hear from you.

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