By now, the thought of crafting a budget shouldn’t make you cringe. Creating a budget is fun and it is THE mist useful tool in directing your money where you want it to go. Whether you are saving for a downpayment on a house or a fabulous vacation to a tropical paradise, setting up and sticking to a budget ensures that you will enjoy your hard earned money responsibly and make the most of it. When you think of the 10 Commandments, you think of the ones given to us through the Bible. However, just like the 10 Commandments in the Bible, there are 10 commandments to effective budgeting. They are the sage rules to live by as you manage your finances.
1. Thou shalt know thy values
I can’t stress this enough. Before you setup your budget, know exactly what you want to achieve with your finances. Know what you value! There is often a disconnect between what people value and whatever resources they have available. Thinking through your values and making sure your budget and the way you spend your money reflects those, can help you avoid regret later on. Knowing your values can keep you from impulse spending as well.
2. Thou shalt keep it simple
So many times we set out to make a budget and we over think it. We make it harder than it has to be. The ideal budget is the budget that gets the job done for you and your situation. I have said it before and I will say it again, get started by organizing your expenses in categories that make sense to you. These categories may include things like, housing, discretionary spending, entertainment, outstanding debt (if you have any) and any specific financial goals that you have. It also helps to track your spending in a certain category for 30-90 days to understand your habits and what should be set aside for them. One other way to make budgeting less intimidating is by focusing on the area or areas you have the most trouble with. I knew I had a shopping obsession, whether it was shoes, clothes, or accessories I had a problem. I had to focus and find way’s to deal with and rectify that issue, and that is what you will have to do as well. Just remember, if it is too complicated you will be less likely to stick with it.
3. Thou shalt be realistic
Keep your budget rooted and grounded in reality. Don’t budget based on the raise you think you will receive or the income tax refund you might receive. Budget based on what you know you have based on what you earn. When looking at your monthly bills, always go to the source, the statement itself. Never guesstimate, know the cold hard facts of how much that bill is.
4. Thou shalt have an emergency fund
It is imperative that you save for an emergency. After all, you never know what may happen; and you would rather be safe than sorry. One month it may be that your car breaks down, or your dish washer is on the fritz. Since you know things will happen, and you are setting money aside each month, you will be in a better position to take care of those things without going over budget. You should aim to save at least 3-6 months of money in an emergency fund. It is always good to save more than that if you can, so once you make it to six month worth of emergency funds, shoot for an entire year.
5. Thou shalt prepare for retirement
Saving for retirement should be on your budget at all times, no matter if you are a baby boomer facing major expenses, such as, healthcare bills and life insurance; or a young millennium with your life ahead of you. Please remember that saving for your retirement can be fun stuff too. Setting money aside now can help with your retirement goals, like buying that condo in sunny Florida. My retirement goal is to travel the world with my husband. What is your retirement goal?
6.Thou shalt save for budget-blasters
Splurging on holiday gifts or that new set of tires and rims will cause a major setback, if you don’t plan for it. Every year you can count on birthday’s, Christmas, and if you are married, an anniversary, so you can plan ahead and add them to your budget. Spare the shock to your wallet and budget by planning ahead for these expenses. Set aside money each month and don’t forget to start your Christmas club account, if your local bank offers the same.
7. Thou shalt allow for flexibility
What you buy and value is sure to change over time. As the years pass, make sure to review and amend your budget to reflect those changes.
8. Thous shalt include your significant other
If you are co-mingling funds, make sure to do the budget together. Although I oversee the finances in my household, my husband completes the budget with me. This way he knows where our money is going, it ensures that we share the same financial goals, and it keeps down bickering over the finances.
9. Thou shalt do what works for you
Finding out what is right for you goes hand in hand with finding and knowing your values. No two budgets are created equal, nor should they be. We all want our money to do different things. For some people, charitable contributions are important, but for some it is not important at all. You need to find what is right and effective for you and stick with it.
So there you have it, the 10 Commandments of Budgeting! Print them if you like, and hang them where you can see them.