By now, you should have calculated your fixed, variable and periodic expenses, and coordinated them with your average income.  Additionally, you should be sure that you are not running a deficit, or that if you have surplus funds that they have been allocated or set aside in some way. 

You can now start using your proposed budget.  Overall, you should view your income and expenses as if you were your own “mini economy” and ensure that the budget that you use is balanced.  Some other tips to ensure that you are adhering to your budget and getting the most from your money include: 

·        Budget period: set a budgeting period that works best with your income and spending behavior:  For instance, if you had previous difficulty adhering to a monthly budget, you can break up your average income and expenses into weekly or bi-weekly segments, making them easier to manage.  It is more important that you develop the habit of being smart with you money than just having a budget that works on paper.

·        Pay yourself first:  This is probably the most important rule to personal finances.  Since you have already setup deductions or allocations from your income for all of your expenses, make sure you have a category for yourself and your future.  Make sure that you always “pay yourself first” so you see the value of the money you work hard for.  Additionally, these allocations or deductions can be a buffer in case your other expenses increase temporarily.

·        Track and adjust regularly:  Knowing that your budget is never perfect (see “Budgeting Pitfalls”), you will need to track your spending and how well your budget works for you over future budgeting periods.  If you find that you are running a deficit, or have surpluses beyond what you planned, you will need to make adjustments to better fit your income

·        Find new ways to minimize expenses:  Now that you know where your hard earned money is going, and are able to adhere to a budget, you may find new ways of saving more money, or be wondering if the fixed, variable, or periodic expenses you pay for should be as expensive as they are.  Looking for new insurance coverage, getting lower interest rates and paying off debts on credit cards, finding ways to lower your energy costs, taking a lunch to work, or buying one less iced mocha each week are all smart ways of lowering your expenses.  Your efforts also free up more of your earnings for savings or new and fun experiences.

If you have yet to complete a balanced proposed budget, please review the budgeting-help.com articles on “Budgeting Setup”. 

References

Gettingfinancesdone.com. 3 Reasons Most Budgets don’t Work

Howtodothings.com. How to Save Money

Chicagofed.org. How to Budget and Save

Erin Huffstetler. Debt Free Living