Building a better budget - By Christopher Wallace

Do you perpetually create then ignore your monthly budget?

Just 32 percent of Americans have a budget that tracks monthly income and expenses. That means 68 percent are operating without a plan—a recipe for financial disaster. Whatever your financial goals are, creating a budget that works can help you reach them.

1. Set your goals. A majority of Americans made financial resolutions for 2014, but just

12 percent say they plan to make and stick to a budget. Without a budget, many of these good intentions may remain just that. What do you want your money to accomplish this year? Pay cash for a vacation? Pay off debt? Build an emergency fund? 

Creating a budget can help you get there. Your first step: Determine your goals and put them in writing.

2. Watch your language. For many people, just the word “budget” conjures up ideas of deprivation. If you hate the word “budget,” try using the words “spending plan” instead. After all, a workable budget is about empowering your money, not restricting it.

3. Track expenses. If your budget isn’t working, chances are you are doing a poor job of estimating your expenses. One way to create a healthier budget is to track your spending for two months. Tracking helps you identify potential areas where you are losing money and not realizing it.

4. Write it down. Now that you’ve tracked your expenses, use those amounts as a guide to create a written budget. Whether you use an online tool, spreadsheet or notebook and pen, record your budget/spending plan in a place where you can access it easily.

5. Monitor your progress. Don’t ignore your budget. Compare your actual expenses with your budget at regular intervals – such as every payday. If you are spending more than you have budgeted in a certain area, a mid-month check-in can help you a) stop overspending in a category for the rest of the month and b) curb spending in another area to account for the extra dollars.

6. Stay flexible. Think of your budget/spending plan as a living document. You don’t want to ignore it. Revisit it regularly and make changes when necessary. If you are perpetually overspending in the food budget, change the budgeted amount and cut back in another area. And as your income or expenses change you can adjust your budget accordingly. Did you know that in many cases, a free, updated Financial Needs Analysis can help you “find money” in your monthly budget to help you reach your financial goals? It’s true.