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Keys to Creating a Successful Budget

A Successful Budget Should Reflect Your Priorities

The first step is not to create a budget. That is the second step. The first step is to sit down with a blank piece of paper and think about the top priorities in your life. What is most important to you? What kind of life do you envision for yourself? This step is crucial, so don’t skip it. You may spend several days deeply contemplating this question. You might want to discuss it with your family, friends, or a religious leader.

A strong discussion with yourself and serious reflection on what matters to you in life, such as faith, values, family, issues, your image of success, worthy pursuits, lifestyle, and legacy may help you correctly prioritize and draw the right conclusions.

Here’s an example of what your priorities might look like: My top priority is to have enough money for my retirement so that I won’t be a financial burden on my children in my golden years. This is more important than buying a two-year-old car when a five-year-old car could do the job. My second highest priority is to have enough money to send my children to college. This is more important than spending a week at the beach this summer. My third highest priority is to feel comfortable that my mortgage is fully paid off. Contributing an extra $100 per month to the mortgage is more important than getting new furniture.

That doesn’t mean the priorities mentioned above have to be yours. Your priorities are personal, and you should set your own priorities. You may decide that taking your kids to another country – so they can experience a different culture – is more important than paying off your mortgage early. Or you may decide the opposite. That’s your decision. The point is that the most successful budget is a reflection of your deep priorities and financial goals.

Making Small and Infrequent Lifestyle Changes is Key

It’s easy to abandon overly ambitious and quick goals. “Going to the gym seven days a week” might be way too ambitious for someone who doesn’t exercise at all, but “going to the gym twice a week” is a reasonable goal. Similarly, drastically cutting your spending or radically redirecting your finances can be difficult. It’s hard to go from spending $100 on entertainment every weekend to spending $0.

Design a budget that allows for small adjustments to your lifestyle. Bring a homemade lunch to work. Shop at the outlet versions of your favorite retailers (like Nordstrom Rack instead of Nordstrom). If you are going to make a big change, do it in the area of the “big ticket” items – like buying a six-year-old Honda Accord instead of a one-year-old Accord. This is a purchase you will have to make only once – after buying that car, there is no temptation to buy a different car the next week.

Track the Results of Your Successful Budget

Nothing compares to the feeling of achievement. Build milestones into your budget so you can celebrate achieving your goals. These milestones can be symbolic – for example, when you pay an extra $10,000 towards your mortgage (in addition to your regular mortgage payments). Of course, you don’t have the complete mortgage paid off yet – but you are $10,000 closer, and that’s a reason to celebrate.

Make sure to visualize these milestones and make them visible and available for viewing and keeping. These positive trend charts may give you the energy to stay disciplined and motivated because you have proof that it’s working.

Here’s

Important advice: Do not necessarily celebrate extravagance. It is like celebrating losing five pounds by eating an entire cheesecake. It teaches us that “celebration” must involve spending a lot of money. It doesn’t.

True celebration – at its core – usually involves having a good time with the people you love. You can celebrate by playing music and dancing in your living room. You can celebrate by renting your favorite movie or spending a day in your favorite garden. Or you can celebrate the way you did when you were a child: by giving someone a cheerful greeting.

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Source: https://www.thebalancemoney.com/ingredients-of-successful-budget-453591

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