The Importance of Sticking to your Budget

In these trying financial times, it is more important than ever to keep your personal finances under control.  One of the smartest and most effective ways to do this is to create and stick to a budget.  When you make a budget you are making a sound plan to live within your financial means. 



A budget will show you exactly how you stand financially while also showing you where you can cut down on excess spending.  Even governments (both federal and state) plan and implement budgets to manage their financial systems.  As this time of economic recession shows us, they don’t always stick with them.


Video: How to Create a Budget


How to Prepare a Budget


Creating a budget, is an easy and effective way to assess where you’re at financially.  It’s also an excellent tool to help get you on the road to living a debt free life.  All you really need to start is a pencil and paper and a simple calculator.  When you’ve got these basic tools assembled, start listing all your monthly expenses, from bills to food and entertainment expenditures. 




Be sure not to leave anything out, even down to your smallest transactions.  This will likely be an eye-opening experience for you, as you start to see where your money’s going and how many expenses fall into the frivolous category.


Video: How to Create a Do-Able Budget


Now that you’ve listed all your expenses, it’s time to categorize them.  Make a chart and give each expense its own column.  Consider grouping all of the trivial expenses into a category labeled “Miscellaneous.”  This will save you time and give you a better picture of what you have available each month for those “impulse buys.” 


create a budget


You can do this by hand or by using a program like Microsoft’s Excel, which will easily do it for you.  (Excel can also take care of any calculations you need to make.)  Once you’ve done this, you are ready to take your available monthly funds and allocate them across your expenditure columns.


When you take the monthly amount of funds available to you and start dividing them across the columns, you will instantly get a clear picture of where your money is going  each month.  You will also be able to see which areas you could cut down spending in, which is one simple way of reducing debt.  In the coming months, if your monthly funds go down, you may face a budget “deficit.”  This means that you will have less money to allocate across your expenditures columns.  Conversely, if your monthly funds increase, you will have more money to work with and will be able to add to different columns as you see fit. 


Now that your budget has been drawn up, you’re ready to go to the next level and make a commitment to stick to it.  It may seem difficult at first, but once you get in the habit of sticking to your budget, it will become a financial lifestyle and keep you on track to staying out of personal debt.  Living within your means entails not living excessively and keeping track of what you spend in a responsible and reasonable way.