Budgeting DO's and DON'Ts

While most people understand the value of having a personal budget, only about 41 percent of Americans actually follow a budget on a monthly basis, according to CNN Money. A budget is a tool that can help you develop good spending habits, save for the future and still have a little extra for unexpected expenses. So, why don't more people have a budget?

Here are some common reasons why people tend to avoid budgeting:

Fear – Let's face it, many of us enjoy “treating ourselves." Some people may worry that if they see how much money they're spending on indulgent things, they'll have to stop.

Unawareness – You might believe that since you are able to cover your bills, you don't need a budget. But without a clear understanding of where your money goes each month, you might be missing out on opportunities to save for your future goals.

Procrastination – You might think that you'll develop a budget “someday." But what happens when that day suddenly hits and you're faced with a difficult financial decision? Sticking to a budget will put you in a better position to make informed financial decisions and ensure you're set up for long-term success.

If any of this rings true for you, now is the time to start budgeting!

Here's a good place to start

Build a budget that will help you spend and manage your money wisely

A well-planned budget can help you take control of your finances and reach your goals. With that in mind, here are some DOs for building a budget.

• DO track your current spending first, for at least a month. You can use a simple notebook and pen, a spreadsheet, a smartphone app or an online program to keep track of your spending patterns. Then make realistic decisions about how you will divide your income. For example, if you're currently spending $500 per month on groceries but you only allow $250 for food in your budget, you could be setting yourself up to fail. 
• DO identify your short-term and long-term financial goals, which should include things like saving for retirement, building an emergency fund, paying down debt, saving for college and vacations or other big purchases as well as meeting your monthly expenses.
• DO prioritize your goals. Saving for a down payment for a new home may be more important to you right now than maximizing retirement contributions. When creating your budget, you will need to allocate your money according to your priorities. Keep in mind that your budget shouldn't be set in stone. As your priorities shift over time, adjust your spending plan accordingly.  
• DO limit your budget projections to a couple of months ahead. Once you get the hang of it, you're ready to budget further ahead.
• DO keep at it. With determination—and maybe some trial and error—you can develop a realistic spending plan that will help you live the life you want to live.

Now let's also address what NOT to do!

• DON'T create a budget that's overly strict. You need to leave yourself some wiggle room for unexpected expenses and the ups and downs of the month. It's okay to build some “fun money" into your budget, as long as you resist the temptation to overspend in this category.
• DON'T forget about irregular monthly expenses such as holidays, birthdays, taxes, home repairs or summer camps. Check your calendar so you know when these expenses come up. Then make sure to allocate some money every month to cover them.

Looking for more ways to improve your budgeting? Check out free tools through our online Education Center. You can also sit down with certified financial counselors from our trusted partners at GreenPath Financial Wellness. Counselors are available to meet with you on-site at many of our locations. Click here to learn more and schedule an appointment.