Why have a budget? Because – a budget will tell you the cold, hard truth about your money. Before credit cards, lines of credit, and overdraft protection, people had to live within their means because they didn’t have a choice – there were no real lines of defense against spending more than you earned. But now – it’s quite easy to fool yourself into thinking you’re making ends meet and you’ve got things covered, even though you really don’t?

The point of a budget is to set money aside for specific purposes – to cover your needs such as shelter, food, transportation, debt repayment and savings.  And a budget also has to take into account wants – such as gifts for others, or a dream vacation.  Your budget should always end up coming out a zero at the bottom. If a category doesn’t work because there’s not enough in it, then you may have to cut from another category to make the balance budget. For example – if you need more for gas one month, you may have to cut from another category – like clothing – in order to make things work. And you also need to keep in mind that things fluctuate – you’ll need more for utilities in the winter and summer months, and more for food and gifts in December.

As for sticking to your budget – that’s another task.  You can try the envelope or jar approach to make sure you only spend the amount of cash you have allotted to a certain category.  Or have separate accounts to cover separate costs – but that can get cumbersome.

Do you have a budget? If so – why, and how do you make sure you stick to it?

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