Building a Budget that Won’t Fail

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Some people love budgets; some people hate them. Some people sing the praises of the helpfulness of budgets; others say they're relatively worthless. Personally, while I can see both advantages and disadvantages to using budget, I find that these financial tools are helpful instruments in our family's financial planning process. They help us stay on track when it comes to our money and how we spend it, and our budget rarely fails.

Sticking to cash

Of course we have bills that we pay with credit cards or have paid automatically, but we still try to limit our purchases on credit, preferring to stick to cash. Like a casino using chips to make it easier for gamblers to toss their hard-earned money onto a gaming table, using the piece of plastic -- also known as a credit card -- makes it easy to swipe away money without much thinking involved. Having to fork over actual dollars for purchases makes us think a little bit harder about where our budget money is going and how much of it is going there.

Built in protection

We build a reserve into our budget each month. This may not be a huge amount, often ranging from $100 to $200. However, it's enough that it handles many of those little unexpected costs that come along -- minor home repairs, school activities for the kids, birthdays and weddings -- and that can kill the success of a budget.

If we don't utilize this reserve amount, there are several things we might do. We may take a little of it for something special like a family dinner out. Otherwise, we might just save some of it or we could roll over a portion of it or even all of it to the next month in an effort to better pad our budget for the unexpected.

We keep it simple

We do our best to keep our budget simple. A single spreadsheet makes it easy for me to update our progress regularly. We keep our budget mainly to the following main categories, which tend to cover the vast majority of our expenses:

  • · Food and entertainment
  • · Home
  • · Utilities
  • · Health
  • · Transportation
  • · Taxes
  • · Miscellaneous

In this way, we cover a wide variety of costs with a few broad categories.

Tracking costs over time

I've tracked costs and utilized a budget for almost two decades now. And over time, I've learned a lot about how, where, and in what amounts we tend to spend. My tracking allows me to go back and see what certain things have cost, how much their prices have increased over time, and better plan for such expenses in the future. This personal inflation number allows us to forecast for upcoming costs more accurately, and in turn, to better avoid surprises that could bust our budget. I also keep paper copies of past budgets and costs amounts in a binder just in case I ever lose my computer data, which, by the way, has happened before.

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Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

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