We hear you: budgets are difficult to stick to – kind of like New Year’s resolutions. Many people start the year with great intentions and a commitment to their goals and end up falling off the bandwagon a few months in. But we know our Earth community, and we know you’re stronger than that! This is the year that you conquer your greatest achievements.
Through our research, we also know a little reason why so many goals don’t get accomplished: they aren’t realistic in the first place. Setting out to lose 30 pounds in a month is intensely difficult and devastating. While we certainly admire this enthusiasm, we’ve also come to recognize that one primary ingredient to setting resolutions and sticking to them is making sure they’re realistic.
Now how can you accomplish his with budgeting? Creating a budget can help you save for your emergency fund, pay off debt, or store away a little extra money for a vacation you’ve been dying to take (and deserve!). Budgeting (the right way) ensures you stick to your goals through and through, as you know exactly where your money is going, how you want to spend it, and what you’re striving for with that pot of gold.
Step one to a successful budget: take the time to fully understand your finances. Download last year’s spending and earnings using an app like Mint or Wally, or simply log into your bank account online and download an Excel document. Take a few hours to understand how much you took home, spent, and saved. Categorize by merchant or category (restaurants, clothing, insurance, mortgage), and dig in deep to really get to know your spending habits.
From there, take your necessary expenses (your home, food, insurance, debt, medical costs, taxes, etc.) and separate them out to start creating your budget. Now comes the important part: add in some wiggle room for surprises. It may seem counterintuitive to add unknown costs to your fixed monthly/yearly budget, but it’s more than necessary. Each month, something is going to come up: your car gets a flat tire. The sole on your favorite boot rips and you need to buy new ones. You leave your rain coat at your daughter’s soccer game. There’s a pair of pants on sale that you’ve been eyeing for months. Things happen; this is the year we plan for them!
Now that your necessities and emergencies are settled, divide up the rest among your other yearly priorities (travel, date nights, etc.). Then compare to last year’s spending and see if the budget you’ve made is realistic. If you spent $5,000 on travel last year, and only have enough room in your current budget for $1,000, perhaps you’ll need to cut another category (lunches out with coworkers, brand name toiletries). Of course, it’s very important to be realistic here: vow to cut out those expenses that you can cut out. For instance, if you need coffee to survive in the morning, don’t vow to never buy a cup on your way to work this year (what if you run out at home? Catastrophe!). Cut out the stuff you truly don’t need, keep the expenditures that help you live your best life (without overindulging, of course), and be realistic about the expectations you set for yourself.
Ensuring realism the entire way through your budget is a recipe for guaranteed success this year. Throughout 2017, take a step back, evaluate your progress, and reassess how far your budget is taking you toward your goals. If something isn’t working, readjust! Try reverse budgeting – take the amount you want to save out of your paycheck as soon as it comes in, then split up the rest among remaining expenses.
Remember – budgeting and sticking to financial goals has to work for you. Challenge yourself this year, but be realistic in your goal-setting. We practically guarantee success!