Article originally posted to Forbes.com.
My husband and I have a joint net worth of $1.3 million, and we’re completely debt- free. When asked what helped us achieve this financial security, it was budgeting consistently for the past seven years. Here are five simple ways to fix a budget that isn’t working for you.
Your Budgeting Time Has Been Negotiable
According to a survey by Credit.com , 27% of Americans don’t think they need a budget. And that’s true. You only need a budget if you want to be great with money, stop stressing about finances, and be able to claim financial freedom someday.
As a financial educator, the top reason students tell me they can’t budget is they are too busy. However, a solid budgeting routine, once implemented and practiced over six-month period will only take an hour or two a month.
That’s a small amount of time compared to the 3.1 hours per day the average American spends streaming video . Starting today, make a dedicated monthly budget meeting non-negotiable and set it as a recurring event on your calendar.
The worst time to allocate this meeting is after a busy workday when you are stressed and tired. Choose a time and place where you will feel calm and can focus on your budget uninterrupted for up to two hours.
My husband and I meet on the first Sunday of the month at 5 p.m. It’s a time when we don’t typically have other commitments, and we both know to show up with our questions and discussion points.
You’re Budgeting Alone
Are you planning your money with someone you trust? If you’re in a relationship, budgeting with your partner would be ideal, but that’s not always the case. If you’re single, or not at a point in your relationship to talk money, you should still pick someone as a partner and a sounding board.
Choosing someone to regularly discuss your budget with can be a form of positive peer pressure that helps you save more . You don’t necessarily have to discuss every detail of your finances with this person, but you can meet with this person monthly to:
Share short-term goals you are working on like paying down debt;
Get trusted feedback on how you are approaching big purchases;
Say out loud any worries or concerns and ask for encouragement; and
Hold yourself accountable by sharing your results each month
I have two students who joined my financial education program at the same time, and they became partners who chat on the phone once a month to share their progress, vent about money frustrations and root each other on.
Consider going outside of your immediate social circle and talk to someone who might have similar financial goals, or whose financial acumen you admire. Find someone you really trust and don’t feel ashamed to share where you might have some challenges.
You Thought Leftover Money In Your Budget Is Good
Are you planning that all your income will be spent when you do your budget at the beginning of the month? When starting to budget, people often plan for the expenses they have, thinking they’ll send any additional funds to their bigger money goals like paying off debt or adding to savings.
The intention is great, but when you take that approach, you can get to the end of the month without any funds left over.
This is often referred to as a zero-based budget , and it works well because it sets the intention for all the money you expect to have available. Zero-based budgeting is what made my debt payoff plan clear, allowing me to pay off $72,000 of student loans in less than a year.
Rather than waiting for possible leftovers, allocate all the money you have coming in, including the amount you want toward your bigger goals, before the month even starts.
You Don’t Have A One-Month Buffer
Finance experts often discuss having a 3-6 months of savings in an emergency fund, but most people will put that money into a separate account and feel like they can never touch it unless it’s a life-or-death situation.
I recommend starting with at least one month’s worth of expenses to not only act as an emergency fund, but to give you room for error when (not if) your budget does not go to plan.
More importantly, by having one month’s worth of expenses inside the account where you pay your bills, you can have your bills paid automatically and stop reinforcing the belief that you are living paycheck to paycheck.
Many students of mine get burned out on budgeting because they are tracking expenses they need to pay no matter what, like their mortgages and utilities. Once we saved up one month’s worth of expenses, they no longer had to track those bill as closely and could spend more of their mental energy on larger ticket items in their budget.
You Treat Every Month The Same
A dead giveaway that your budget isn’t accurate is if it looks exactly the same every month. Most people think of budgeting as just what you need, but you want to allocate money toward the variable expenses like holidays, celebrations and vacations.
At the end of every year, there’s always one student that exclaims, “Christmas came out of nowhere,” when they could have planned ahead for holiday gifts. What you plan to spend in November and December is probably going to look very different from what you spend in April and May.
A budget is forward-looking, not looking into the past. Unless you are living like a robot, every month’s budget should look different because you are not just allocating the necessities.
By treating your budget as a changing plan each month, you’ll learn after a few months that a budget isn’t meant to be perfect. It’s meant to give you peace of mind that you have a plan for the expenses within your control.
