5 Things to Remember When Creating a Personal Budget

If you've made the decision to develop a budget, then congratulations. You are well on your way to financial stability (and maybe even freedom!). Just make sure you give yourself the best chances of sticking to that budget by doing it right.


Here are five things you need to remember when creating a budget.

1. Retirement.

It's never too early to start planning for your retirement. If you find that your budget is stuck in the here and now, then you need to go have a talk with your future self – your future self who is counting on you to take care of your future well-being. Even the smallest amount can go a long way, if you start compounding interest now. Include some retirement savings in your budget – period. (Future self says, “thank you.”)

2. Inflation.

When working your future financial goals into your budget, keep in mind that your cost of living will go up each and every year. Use three percent as a safe rough estimate, and go from there.

3. The unexpected.

Of course, there is no way you can possible know exactly what will come up under that category of “things I didn't expect to happen.” But that doesn't mean you shouldn't plan for it. As a matter of fact, it is often the unexpected things that completely throw us off our budgets and send us into a financial tailspin. So, how do you plan for that which you do not know? The best way to set some money aside for those “what ifs” is to allot a specific amount of each paycheck for an emergency fund. That way, you are basing the amount on your financial means, so it won't put you under, and are at the same time setting your mind at ease.

4. The little things.

Just as the old saying goes, the little things go a long way. Before you sit down to draft a final budget, spend a month recording everything you spend on the little things: drive-through food, vending machine snacks, that daily cup of coffee from Starbucks, lottery tickets, the milk money you give your kids for school, the church collection jar, etc. Chances are, those little things are capable of making a big dent in your budget. They must be accounted for.

5. Things you want.

No, you don't NEED that new pair of shoes, an upgraded smartphone, or those concert tickets, right? But that doesn't mean you won't get them, if you really want them. Include some room for enjoyment in your budget. Otherwise, you are setting yourself up for failure.

Creating a budget isn't all that difficult, as long as you know what you're getting into. Keep these oft-forgotten pointers in mind to build a personal budget that can sustain you over the long haul.

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