Top Ten Features of a Successful Budget
What makes a good budget? In all the budget bloopers and blunders I've seen, the same few problems keep rearing their ugly heads. To avoid them, here are the top ten most important features of a successful budget.
- Categories that fit your personal situation and your spending habits, not somebody else's.
- Accurate income projections.
- Enough categories to give you a meaningful picture of where your money goes and where you might be able to cut costs, but not so much detail that tracking is a chore that you'll soon tire of.
- Inclusion of expenses that don't occur on a monthly basis, such as auto maintenance, homeowners insurance, personal property taxes, service contracts, etc.
- Regular review of categories to determine if you need more or fewer, review of expenses, and brainstorming about ways to trim costs in each category.
- Cash expenditure tracking and recording. Cash spending is the biggest leak in most budgets. Cash disappears quickly and if you don't write down everything you spend it on, you'll have a distorted look at your spending.
- A line item for savings so you treat a contribution to your savings account just as you would a bill you owe.
- Realistic written goals. Budgeting isn't about tracking your costs, it's about setting financial goals (saving for a downpayment on a house, buying a new car, getting out of debt, saving for retirement, putting your kids through college, traveling, etc.) and finding ways to meet them. Without goals, your budget is just a pair of handcuffs.
- Identification of spending patterns you may not have been aware of when you weren't tracking your spending.
- Most importantly, internal motivation and a positive attitude!