There are a number of things you can do to increase the likelihood that you will be successful in your financial budgeting.

  1. Keep your budget reasonably simple. To help prevent your budget from becoming cumbersome, don’t use too many categories for your spending.  For most people, no more than 20-25 categories are sufficient, and you may not need even that many.
  1. Use descriptive spending categories. Avoid ambiguous spending categories such as “Cash,” “Miscellaneous,” or “Other.”  Categories like these can become financial “black holes” into which various types of spending will disappear, with the result that you won’t have adequate knowledge of how the money is being spent.
  1. Tailor your budget to fit the needs and lifestyle of your family. Don’t be intimidated by percentage guidelines that indicate what a typical family should allocate for each category of spending.  Guidelines are just that – they are not rigid standards.  The health, responsibilities, size, and preferences of your family are what you need to consider.  Of course, if you spend considerably more than the guideline percentage in any category, you will need to offset this by spending considerably less than the guideline percentage in one or more other categories.
  1. Have a specific amount in your family’s budget for the personal needs of each member of the family. A typical budget has categories such as clothing, cosmetics, haircuts, etc., which cover spending for the entire family.  This can create problems if some family members are not able to get their fair share, which can occur when other family members have already spent more than their share of the amount that is budgeted.  If, instead, such expenses are included in an “allowance” category for each family member, some of the categories that otherwise would need to cover spending for the entire family can be eliminated.  And, as children mature, they can be given responsibility to manage a greater proportion of the amount that is included in the budget allowance for their personal needs.

Caution: Any type of expenses that might lead to conflicts regarding who is responsible for paying for such expenses should not be included in personal needsIn such cases, use a spending category that is for the entire family.  Two examples are gas for a car and gifts to others.  If you need to travel somewhere in a car, you don’t want to argue about whose gas money will be spent.  And, if you need to purchase a gift for someone outside your immediate family, you don’t want to need to determine how much each family member should contribute to purchasing the gift.

  1. Make provisions in your budget to save money specifically for major expenditures that will be necessary at some time, although not necessarily during the current year. Examples of such expenditures include the cost of your next car and the cost of replacing the heating or air conditioning system or the roof of your house.  If you don’t set aside adequate funds to pay for such expenditures, you will be faced with two unattractive options: deplete money you have saved for other important uses (e.g., retirement), or borrow and pay substantial interest charges that will reduce your long-term standard of living.
  1. Build some rewards into your budget. A budget can help you determine if there are categories of spending in which you have been skimping too much.  If you reduce the amount you spend in a category that has a low priority, you can increase the amount to spend in a category with a higher priority.
  1. Be realistic about any spending reductions you plan to make. The process of budgeting should help reveal the categories in which you need to  reduce your spending, but be careful not to cut too much from any category or else your budget may be overly restrictive and you will have difficulty making it work successfully.
  1. Don’t treat your budget as if it is set in stone.  You may need to make significant changes in your budget, especially if you are confronted by unexpected major developments, such as a change in your job or an unusually high increase in your utility bills or some other category of your nondiscretionary spending.
  1. Keep your long-term financial goals in mind. Current sacrifices that you are making in your spending should provide long-term benefits that you might not otherwise have to enjoy. Since the budgeting process takes long-term, as well as short-term, priorities into consideration when it is done properly, it can provide not only guidance for spending during the current year, but also motivation to save for your future needs, wants, and desires.
  1. Be patient. It takes time to become proficient in developing and properly utilizing a budget.    Even families who have been budgeting for a number of years face challenges in their efforts to make their budget work well.