Four Repairs For A Broken Budget

The road to broken budget plans is paved with good intentions.

Creating a budget and sticking to it are two elements of effective financial planning. But sometimes it's hard to do. You know that you need a budget, but you can't figure out how to make it work. If you've tried and failed in the past, it's time to start again. Here are some basic tips to keep you on the budget path.

Motivation

Drawing up a perfect budget is one thing-following it through is another. Motivate yourself to stick to the plan by keeping a clear, concise goal in mind. Maybe you're saving up for retirement, or funding the kids' college, or getting rid of a mountain of old debt. Every latte skipped or belt notch tightened will move you one step closer to that ultimate target.

Saying "no" to the small luxuries today feels so much better when you know why you're doing it.

Personal appeal

Some people cash in their paychecks and divide it up in separate envelopes. They won't spend a dime from the grocery budget on entertainment, or vice versa. Others pay the big bills, but first scoop out some savings; then they play the minor details by ear.

If the stricter method works for you, that's great. But it isn't for everybody, and you might do better with the more fluid strategy, or some hybrid of the two. Find the method that works for you and stick to it. You're not going to be happy forcing your financial life into some expert-approved mold that doesn't fit your personality and lifestyle.

By the numbers

Whichever budget style you're going with, you need to track your expenses. The envelope method is one way, but far from the only one, or even the best one.

There are several software packages available to help you nail down the details of your cash flow, such as Microsoft Money, Quicken, or GnuCash. Pen and paper is a more traditional approach, and some people collect every receipt and invoice in three-ring binders, organized by date and spending category. Your budget needs to work for you, so go with the method that suits your needs and temperament. They all work. The important part is to make sure that you know where you're using your money.

Stay flexible

Every plan needs some wiggle room. Surprises happen, and you should be ready to adjust your budget when they do. Maybe it's a medical emergency that adds to your costs, and keeps you out of work for a while. Then it's time to cut deeper into your budget, taking out a few of the extras you'd been allowing yourself, until things get back to normal again.

You might win the lottery, throwing a new light on your cash flow and your savings needs. But until this unlikely event occurs, stay light on your feet, even as you hold on tight to your plan.