The Budget | What it Can and Can’t Do

Last updated on: June 24, 2011 at 7:00 am by Tim

The Budget | What it Can and Can’t Do 2011-06-24T07:00:02-05:00 Tim

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If you don’t have a budget already, I would encourage you to start one right away. We featured an article recently on how to make a budget, so you can reference it to get a jumpstart.

Maintaining a budget is a great thing, but it does have its limits. Knowing what a budget can and can’t do for you is important because it helps you to set reasonable expectations. So whether you’re just starting to budget or have been using a budget for a while, these tips should help you to keep a realistic view of what a budget can and can’t do for you.

The Budget Can:

Keep You On Track With Your Expenses

I hate the feeling of not knowing where your money goes each month! With a budget, you can give each dollar a home before it’s spent. Guessing how much you’re spending on eating out and other things usually falls short of the actual amount spent.

The Budget Can’t

Keep You From Spending

Unless you’re using the envelope system, a budget cannot physically keep you from overspending in an area. Even then, you could still use a credit card, or pull from another source. Behavioral modification and discipline in spending are really the only ways to control your spending.

The Budget Can:

Show You How Much You Can Save

This is especially true with a zero based budget which puts every dollar towards an expense or category for saving. This way, your extra dollars can be put towards a savings vehicle and not just accumulate in your checking account where you’ll have the temptation to spend it!

The Budget Can’t:

Actually save money for you – It’s up to you to save it!

Help yourself save by creating an auto draft from your checking account to savings account on the day that your check is deposited from work. You can also defer a part of your paycheck right to your retirement account – if you don’t see it, you won’t miss it!

The Budget Can:

Show You Areas Of Improvement

A budget can actually be more freeing than restricting because it shows you the areas that you can spend your money on. Yes, you’ll quickly find that certain areas may need to be cut back, but in doing so, you’ll reallocate the money to areas that are more of a priority.

The Budget Can’t:

Make The Improvements for you

Hopefully you can find more money by cutting back in certain areas and focusing on the most important items each month. The best way to budget is to test it out, make corrections, and keep adjusting until you find a system that works.

How does a budget help you? Any of the ways listed above?

Budgeting

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