Budgeting 102: Sticking to your budget

Even the best budget can unravel if the right tools are not in place. In this article, we look beyond the basics and focus more on what it takes to stick to your budget.

In our first budgeting story, we looked at the basics – how to create a decent, detailed budget. But this is only half the job.

Now the hard work begins. Here are four tips to help you stick to your budget.

1. Stocktake. Spending more than you earn?

Subtract your total weekly expenses from your total weekly income. How’s it looking? Ideally, you’ll have more coming in than going out. Over time you’ll be able to save and build up your reserves.

First, you want a buffer in case things go wrong. Financial advisors used to talk of having six month’s spare cash in the bank. When this seemed out of reach for most, they talked instead of having three months in reserve—but many people struggle to even have one.

Living month to month is stressful enough; living week to week even more so. Getting your finances into a stable and sustainable place is the goal. Properly accounting for income and outgoings is the first step.

2. Cut costs

Realistically, the quickest way to improve your personal bottom line is to cut costs – to curb unnecessary spending.

Go through your expenditure. You’ll find there are fixed costs (e.g. rent or mortgage payments) you can do little about, and other areas where you could cut but it’d be unwise to do so (e.g. insurance).

Unfortunately, the areas where you can make the greatest savings (your discretionary spending) are often the things that are most fun – like going to the movies or eating out.

Once more, the crucial consideration is ‘balance’. You can draft an extreme plan, but you’d be unlikely to stick to it.

Be realistic. Don’t introduce cuts across the board or take $20 off food without knowing what you can (and will) give up or change.

3. Have a plan

It’s easier to keep to a budget if you have a goal you’re working towards. Perhaps you've just got debts you want to pay off.

Whatever it is, having a plan is the best way to keep focused and ensure spend-ups and blowouts don’t happen too often.

4. Track your progress

Check your finances each month to see if your savings and spending plans are on track. If you’re extra organised, fill out your own Statement of Financial Position in Excel.

Don’t just look at the bottom line. Where are you over? Where are you under? What little fixes could bring things back into line? Are your targets realistic?

Remember, the best budgets are regularly reviewed and refined – and evolve over time.