You tracked your expenses, assessed your financial situation, and decided a budget is necessary. Subsequently, you created a budget with the hope that it will improve your finances.

However, what are the secrets to maintaining that budget successfully? How can you live with your budget on a daily basis – and come out ahead financially? How can your budget become a useful tool that inspires joy rather than dread and is a long-term tool for financial success?

 1         Keep a Positive Attitude about Budgeting

In the modern world, many things conspire to make budgeting unpopular. We have become used to buying now and paying later. Many people spend more than they earn, leading to financial trouble.

Keep remembering why you have set up your budget, and the advantages of living with a budget:

• You will live within your means.
• Your income will exceed or equal expenses if you stick to your budget.
• You will know exactly what amount of money is being spent, and on what items.
• You are more likely to accumulate funds toward your financial goals.

 2         Make Your Budget Goal-Based

Are you budgeting just for the sake of budgeting? Without a goal, your budget may not sustain your interest and motivation over the long term. Tie your budget into long-term financial goals.

Having concrete financial goals will give your budget a purpose. The following are generic examples of financial goals that can drive your budgeting efforts:

• I want to save $1,000 per year for an annual vacation.
• I want to save $18,000 in five years so I can replace my aging car and buy a new car with cash.
• I want to invest $1,000 per month for retirement so I can accumulate $1,000,000 by age 55 years.

 3         Monitor Spending

When setting up your budget, you may have monitored your spending for a time. If so, your budget has a better chance of accurately reflecting your financial situation and spending patterns.

Continue to monitor spending within each of your budget categories to ensure adherence to the budget.

For example, if you have budgeted $300 per month for groceries, track all grocery expenditures made each month. Ideally, you will come in under or at $300. If you exceed your budgeted amount for groceries on a regular basis, it may be time to either:

• Cut back on grocery spending for the month.
• Adjust the budget and increase the amount allotted for groceries.

 4         Adjust your Budget if Needed

A budget may have to be adapted for changing times. Here are some changes that may need to be factored into your budget:

• Your income has increased.
• You or someone in your household has lost a job.
• You have incurred medical expenses.
• Your auto fuel costs are increasing, even though unnecessary driving has been eliminated.
• Your electric bill has gone up.
• Your health insurance premium has increased.

If outgoing expenses exceed income, the budget needs to be adjusted. Expenses should be trimmed or income increased.

 5         Do a Reality Check

Be honest with yourself. For example: Can you really live with $50 a month for groceries? If you make your budget leaner than is realistic, you are setting yourself up for frustration and putting the success of your finances at risk.

 6         Pay with Cash

Credit cards (unless you are disciplined) make it easy to spend more than you make, and only delay the pain. Stick with cash payments unless you are able to keep your expenses under your income, and you pay off your credit card balances each month.

 7         Maintain an Emergency Fund

Budget to pay yourself first. Usually, this means savings in some forms – retirement, a savings account toward particular goals, and an emergency fund. The emergency fund is of particular importance. It will help ensure that future surprise expenses (like the car breaking down or the water heater failing) do not derail your budget. Recommendations for emergency funds include:

• Three-to-six months of living expenses if you have a steady job.
• Six months to one year of living expenses if you are self-employed.

More savings is always better, but do not let the large amounts listed above intimidate you. Begin saving toward an emergency fund, even if saving only $10 per week, and build it into your budget.

 8         Budget for Leisure and Fun

Include some money in your budget for fun, so that the entire budgeting process does not seem too austere. Even a little amount, such as going out to a movie once a month or going to dinner at an inexpensive restaurant once a week, will help you feel balanced.

 9         Snowball your Debt Payments

If debt payments are factored into your budget, apply the most resources to the lowest-balance debts first. When these debts are paid off, apply the amount now freed up to the debt with the next lowest balance.

See http://zenhabits.net/2007/03/eliminate-debt-with-the-snowball/ for an explanation of the debt snowball method.

 10       Reassess Regularly

Look over your budget once a year, or more often if needed. Has anything changed? Adjust categories and reassess your overriding goals as well.

Additional Resources

• Simpleplanning.com budget planning software: http://www.simpleplanning.net/Financial%20Calculators/BudgetPlanner.html?gclid=CLPGlqiDiZUCFQRJFQod5VhbrQ

• Budget tracking software and online personal finance community: http://rudder.com/default.aspx?gclid=CM3dz-CDiZUCFQObFQod5SVspw

• Online community for people attempting to live within their means: http://www.frugalvillage.com/forums