Simple Flexible Budget Techniques

Simple Flexible Budget Techniques

Budgets help people stay on track with spending, saving and accounting. For people unaccustomed to budgets, the notion of developing and maintaining a budget may seem overwhelmingly complex. Others may be concerned that rigid budgets won't meet changing needs or financial demands throughout the month, quarter or year. But budgets don't have to be complicated or set in stone. Budgets can be both simple and flexible, depending on the techniques chosen to develop and maintain them.

Tracking

• Budgets should reflect current earning, saving and spending habits, but if you're not sure what those habits involve, there's a simple way to find out. Track your expenses for a month or two, noting all income earned, bills paid, debt incurred through credit card purchases and money tucked into savings accounts. This technique helps you understand your current financial situation, making it easier to develop an effective budget.

Bills

• Another technique to simplify sticking to your budget involves linking your monthly payments to bank accounts so that they're paid automatically, with funds immediately deducted from the balance. This way, you're able to easily track deposits and withdrawals, comparing current bank balances with the monthly budget to make sure you're still on target.

Credit

• Credit card spending can ruin the most well-intentioned budgets because of their ease of use, high interest rates and fees. A simple technique for avoiding credit card use and staying on budget is to leave your cards at home. Reserving credit card spending for emergency situations will eventually reduce the presence of credit card debt payments on your monthly budget, freeing up funds to direct toward savings or preferred activities.

Trimming

• Trimming unnecessary extras from your budget also frees up money that can be better spent paying down debt, socking into savings accounts or diverting it toward long-term financial goals, like a family vacation or energy-efficient car. Opt for home-filtered tap water rather than bottled water, rent books from the library rather than pay newsstand prices, consider purchasing generic rather than brand-name prescription drugs or treat yourself to an at-home pedicure rather than splurging at the spa. Dollars saved here and there can be reinvested back into your budget, creating larger savings in the long run.

Monthly Reserves

• A simple technique to build flexibility into your budget is to include a miscellaneous "slush" fund in addition to other budget categories including housing, food, health insurance and transportation. Allocating a specified amount of money as a cushion allows you to make ongoing decisions throughout the month concerning how the money will be spent. A new radiator, contact lens prescriptions or winter heating bill won't throw your budget completely off track when you've built in funds to address them. Even if the flexible slush fund doesn't completely cover sudden costs, it'll help defray the total bill