January 26, 2009

Back to Basics: The Budget Test Drive

{Every Monday during the month of January, I'll go Back to Basics and discuss ways to build a realistic household budget. I'd love to hear what works for you! Add your ideas or links in the comment section at the end.}

Back to Basics: Budgeting, Part Four {The Budget Test Drive}

(Go here to see links to Parts 1-3 of this series.)

This series has covered some budget basics: tracking your everyday spending by saving each and every receipt; listing your fixed and variable monthly expenses; and, last week, online tools and downloads you can use to build a working budget.

If you've been following all these steps, it's time to take your budget for a test drive!

Using whatever tool, download, spreadsheet, or notebook, set your budget for next month. Try to budget every dollar that you expect to come into your household; even if you find yourself with a small amount leftover after you fill in the amounts you predict you'll need/spend next month, assign that leftover amount to your Misc. Expenses category. Give each dollar a place and a purpose!

Test driving anything requires tweaks and adjustments as you move foward, and as you learn and gather more information. Not only will you need to update your budget to reflect *real* spending and *real* bill totals versus your current *predicted* spending and *predicted* bill totals, you'll need to watch for trends. Are you underspending in a certain category? Overspending? Did you have unexpected expenses? Maybe you had a windfall of income/cash into your household this month?

To do this effectively, you should update your budget *every* time you spend money or pay a bill. If you can't do this daily, you should save EVERY receipt and dedicate a time each week to both pay bills and update your *real* daily spending categories.

Don't fret if your *predicted* budget ends up looking very different from your *real* budget.

Remember, this is a test drive. You're testing your brand new budget out with the intent of finding errors, shortfalls, and windfalls so that you can better predict your spending needs in the future.

Bottom line: the budget test drive is a learning experience, not a pass/fail test. There is no *failure* in budgeting, only improvement. So don't beat yourself up if your predicted budget falls short of your goals; take what you learn from the test drive and build on it for the next month.

And congratulate yourself for taking charge of your financial life!

What is your best piece of advice for those just beginning to use a monthly budget? Share in a comment!

Thanks for reading and subscribing to The New Frugal Mom!

No comments:

Post a Comment

Thanks so much for reading The New Frugal Mom and for taking the time to comment.

I do reserve the right to delete negative comments.

Thanks for sharing! I love to read your comments and learn something new from my readers!

Note: Only a member of this blog may post a comment.