Creating a realistic budget should take only 1 hour the first time you do it. Then only 1/2 an hour or so each month to keep it up to date.
Here is a guide to set up a realistic and successful monthly budget
1. Make a commitment to wealth building
If you are serious about becoming financially independent, you have to commit to saving. The way to incorporate wealth building into your budget is to allocate and segregate your money toward that objective. The best way to do that is to set up an automatic withdrawal that goes into a wealth building portfolio. Don’t mingle your wealth-building funds with other accounts. And don’t even think about using that fund for any other purpose whatsoever, including emergencies.
2. Create a start-over-again fund
After making an allocation to your wealth-building fund, put additional money into a separate account. The SOA Fund should consist of at least 1 year’s worth of living expenses. Your SOA fund is going to be substantial. It may take quite a while to accumulate to the amount you want in it.
3. Budget for necessary expenses.
Necessary expenses are housing, utilities, food, clothing and transportation. Determine these expenses 10% to allow for errors.
4. Anticipate necessary future expenses
There will always be additional expenses like new computer, repainting the house, gifts for Christmas and birthdays, and back-to-school shopping for the kids. These are all expected expenses.
5. Plan for unnecessary expenses
Unnecessary expenses include everything else that you expect to spend money on that month (e.g. cable TV, meals, travel, hobbies).
6. Make budget adjustments every month.
It’s a good idea to schedule time at the end of each month to plan the following month’s budget. Every month might be a little bit different (e.g hosting dinner party, driving more, traveling/holiday, going out with friends.
It should be very much like the current month’s budget, with a few adjustments. But since you have taken the time to create a budget to begin with, there should be only minor surprises.
Sven Franssen