1. Know the Difference Between Need and Want
Put that purchase of a new designer purse or big-screen television on permanent hold, because you do not need those things. Too many times people blur the lines between the two types of expenses. You need food, shelter, clothing, transportation and utilities. The rest are wants. Advertisers will tell you differently and if heard enough, it becomes a false truth. Nothing will derail the good intentions of a budget quicker than careless spending on the next gadget or some other material want masquerading as a need.
2. The Money Is the Details
Look at the little line items in a budget as well as the big. Those small purchases of a caffe latte here and new DVD there can accumulate to a large sum very quickly. Often, a budgeter will pay close attention to the large ticket items like car payments, mortgage, and utilities and forget about those small items that can ruin even the best budgetary intentions.
3. Reality Is Not What it Seems
Understand that every time that you sit down to make a budget, in the end, it will be wrong. The reason is that you base a budget on what you think you will spend. This is akin to being a financial fortuneteller, and because no one can predict the future, the budget figures will most likely miss the target. Don't become discouraged when you go over budget. Remember to stay true to the idea of a budget and its underlying principles and your efforts will pay off in the end.
4. Treat Yourself
Have some fun with that hard-earned cash. The word "budget" brings up glum thoughts of deprivation and deficit, but that does not have to be. Build a fund into the budget expressly for frivolous spending, within reason, of course. You can even use this fund as a reward for staying on the budget during the month. Treat a budget like a financial diet; most diets build in rewards for eating well during a certain period.
5. Each Month Is Not Created Equal
Ho! Ho! Ho! Does anyone spend the same amount of money during the holidays as they do during the rest of the year? The answer for most everyone is no. Nevertheless, most budgets treat all months the same, and this just doesn't make sense. Make necessary adjustments for all the differing monthly contingencies in a budget. A flexible budget lasts longer than a one-size-fits-all one.
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