Adding Some Glue to Your Budget

September 28, 2016
DMD Staff

Budgeting sounds simple -- and it is -- but only if you follow key rules.

In

Part 1

and

Part 2

of this series, we looked at four key considerations that can help you build your budget. While building the budget is a very important first step, maintaining the budget is what sets the best retirement savers apart from the others.

Let’s take a look at four key steps to sticking to your budget.

Measure what you spend.

It all sounds so simple, doesn’t it? How can you keep track of your budget without knowing what the actual spend was? But so many people ignore this key second step, and it’s why their budgeting process never really gets off the ground. A kept budget is one that is informed by actual spending is in a constant state of adjustment. While this may sound like tedious work, there are a million apps from banks and many other vendors that make this process very easy to automate. The majority of your expenses can be categorized right from one of these easy-to-use apps.

But it’s the fill-in-the blanks stuff that may be most eye-opening. Once you start keeping track, it may seem absurd that you spend $100 per month on coffee when you could spend a fraction of that by putting homemade coffee in a travel mug. As you begin to see patterns, not only will your budget improve, but you’ll be more likely to spy expenditures that aren’t necessarily in line with your financial goals.

Keep it simple.

Yes, there are great budgeting tools out there from Quicken and many other sources that can be really helpful. They can break down your spending and savings goals into colorful charts and track your progress toward meeting savings goals. But none of them are absolutely necessary. A simple spreadsheet does the math for you. Heck, a pencil and pad can do the trick. Don’t let whatever system you’re using add a layer of complication, as this will likely make you think of budgeting as a chore rather than as a tool to help you meet your financial goals.

Wait out an impulse purchase.

The age of immediate internet and on-demand television has us all leading lives of instant gratification. But the need to have something right now often supersedes our long-term desire to save for a secure retirement. The key to resisting impulse buying is to set a waiting period for yourself. It can be a week, or even just 24 hours, but a brief time away from the item in question may immediately cool your desire to have it.

Alternatively, if you do make an impulse purchase, don’t beat yourself up too badly about it. Remember, your retirement plan and your budgeting process are not there to serve as horrifying constraints. Over the long term, unless that purchase was a wildly expensive item, it won’t break your financial progress.

Set incremental goals.

The biggest problem with a long-term goal is that it seems so far away! Setting aside little amounts in any one income cycle won’t seem like it’s making a dent in your retirement number. The key is to set smaller, incremental goals you can hit each year. It’s an old truism that the shortest cashier line is the one that’s steadily moving, not the one that ultimately takes the least amount of time. Little bits of progress are measurable and will keep you motivated.

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