One of the hardest challenges that many of us face is sticking to a budget. If you’ve ever created a budget before, you know all too well that after a few months we find ourselves abandoning them.
The key to a successful budget/spending plan is creating it so that it fits your financial priorities. Before you draw up your spending plan for the coming year, take a few minutes to stop and think about what’s important to you financially. Put together a budget based on what matters to you, and you will be more likely to stick with it.
Your first step is to figure out what you value. Be honest. Do you want to live debt free? Or are you content to slowly chip away at your debt and be more comfortable in every day life? Figure out what you really want from life right now, as well as what you want later on.
While you may have to make an effort to adjust your lifestyle and tailor it to your desires, your current budget is a step toward accomplishing your idea of financial peace. Really think about your own core values — forget about what others think you should be doing with your money — and figure out what success would look like for you.
Once you have established your values, you can begin thinking about how to use your financial resources in a way that will help you reach your goal. Only then can you start putting together a spending plan for the year that reflects your own lifestyle preferences.
Next, figure out what you want your money to accomplish. What do you want your money to do for you? Rather than thinking about what you can do for more money, figure out what you want your money to do for you, in terms of making your life comfortable, securing your future, and avoiding wasting your resources.
You don’t even have to itemize everything ahead of time. My spending plan is pretty simple. I know my priorities, and I make sure they are funded each month. Once all of the priorities are taken care of (usually through some automated process), I can use the rest of the money for other things. As long as the priorities are covered, I don’t particularly care what the rest of the money is used for.
Identify your most important financial goal for the year, whether it’s paying off credit card debt, saving up for a family vacation, or boosting your monthly retirement account contributions. Think about why this goal is important, and how you hope it will contribute to your financial success.
This exercise can be very motivating. It can help you internalize your financial goal, and provide you with a reason to stick to your budget later on, when things get hard.
Creating a successful budget isn’t about going through the motions of filling out a form with your income and expenses listed. If you really want to make it work for you, it has to be about helping you work toward your long term financial goals.
What can you do in the coming year that will put on the right path to your desired financial future? Deciding what matters most to you financially in the new year is entirely dependent on figuring out what you want your future success to look like, and then acknowledging what you need to do now in order to make that happen.
Picture by *Sally M* via Flickr
The articles are written by personal finance enthusiasts (not certified professionals) based on their personal experience. What works for them may or may not work for you, and you should always consult a financial advisor before making important financial decisions.
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