4. Maintain some general rules
Last week I watched a big-budget superhero movie. It cost a couple of hundred million to make and lost a ton of money. The movie was fine, but I can’t conceive of spending that much money on something so forgettable – especially when, according to reports, the production went way over the original budget.
But we’ve all been there. Budgets are difficult to develop and can be even harder to stick to. Try as we might, life can get in the way: an unexpected repair, an expensive healthcare situation, and so on. Even though three out of four Americans have a monthly budget, the vast majority overspend at times.
In my experience, people tend to be optimistic about their budgets. We tend to overestimate how much we have available to spend, or how much we’ll need to spend, or both. The problem isn’t confined to our personal expenditures, either. Businesses and government agencies are frequently guilty of being too aggressive about incoming revenues.
Here are some tips for making and keeping to budgets:
1. Get it in writing
Seems obvious, but studies show that you’re more likely to achieve your goals when they’re written down. Putting pen to paper (or keystroke to screen) can help you commit to your budget.
2. Embrace the automatic
Automatic transfers you’ve set up beforehand can help prevent you from cheating on your budget.
3. Account for irregular expenses
Many expenses are monthly, so some people employ month-by-month budgets. However, some expenses are annual, quarterly, or some other interval. Annual subscriptions for streaming and cloud software services, for example, can ding your bank account unexpectedly because you’ve forgotten
when the auto-renew kicks in.
Nobody has their budget in front of them all the time. One way to stay on track is to establish some ongoing spending rules. These might be related to activities such as going out to eat – for example, limiting your restaurant visits to twice a week. There’s no need to have an exact dollar amount; that might be too much information to keep in your head at one time.
5. Keep it simple and specific
Create general categories of spending instead of dozens of line items that can get confusing. And give the categories specific names. It’s less tempting to pull funds from one spending category to another if you’re taking money out of one named, say, Children’s College Fund.
As a last tip, review your budget periodically and track actual vs. planned spending. If you’ve made some incorrect estimates, you have an opportunity to finetune your numbers. Creating a budget only to let it sit buried in a folder somewhere on your hard drive might cause you to forget it’s even there. But setting a reminder to open the file and compare your results against your plan can keep you from burning through your funds in a flash.
Evan R. Guido is the founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or eguido@aksalawealth.com. Read more of his insights at heraldtribune.com/ business. Securities offered through Avantax Investment ServicesSM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM, insurance services offered through an Avantaxaffiliated insurance agency. 6260 Lake Osprey Drive, Lakewood Ranch, FL 34240.