Now that you've drawn up a budget, you need to bring your spending into line with your plan. One way is to get a ledger book that's divided into columns. For each month, you'll create three columns for budgeted expenses, actual expenses and the difference between the two. A spreadsheet software program like Microsoft Excel can even do the math for you and make this record-keeping much easier.
As you look back over your income and spending each month, you'll see where you hit or missed your budget goals. If your spending is not staying close to the limits you set, you'll need to take action. One solution is to increase your income. You can take another job, start an at-home business or ask for a raise at work.
More often, though, you'll need to cut expenses. Your budget will help you to focus on areas where you can and should cut. Remember that the more you spend on a category, the more potential savings are available. For example, if you cut your $650 food bill by 10 percent through careful shopping, you'll save $65 for the month. If you spend $20 on coffee, a similar cut will net you only $2.
As you might expect, many of your cuts will come in the category of Wants. For example, you can put off buying clothes or shop at a thrift store instead. You can have pizza at home instead of a dinner at a fancy restaurant. But since some of your biggest expenses are in the "must-have" category, those areas might offer bigger savings. Does your home need to be as large as the one you now own? Do you need a BMW to get around? A more modest home or car can take a lot of strain off your budget.
Review your spending every month. If you're having trouble sticking to your budget, you might try a virtual envelope system to reduce expenses. Imagine that the budgeted amount for each category is an envelope with that amount of money in it. Once it's gone, no more spending. You'll be forced to live frugally, even if you still have funds in your other "envelopes" [source: BankofAmerica.com - Living].
What if you're running a serious deficit every month? The government might get away with it, but you can't for long. Resist the impulse to immediately cut the amount you've budgeted for savings. Instead, comb through your spending and look for relatively painless cuts. A budget is all about setting priorities for your spending.
It may sound contradictory, but the best thing about a household budget, says MSN Money's Freedman, is that it gives you freedom. "When you know you've got enough money for all of your needs and at least some of your wants," she says, "you can sleep at night."
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- BankofAmerica.com. "How to approach savings as a couple." http://learn.bankofamerica.com/articles/savings/how-to-approach-savings-as-a-couple.html
- BankofAmerica.com "Living on a budget - the envelope system." http://learn.bankofamerica.com/articles/money-management/living-on-a-budget---the-envelope-system.html
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- Freedman, Donna, MSN Money personal finance columnist and author of Surviving and Thriving blog. Personal correspondence, Nov. 9, 2011.
- Herdrich, Kelly. "Household Budget Management: Top Online Tools," womansday.com, June 16, 2009. http://www.womansday.com/Articles/Life/Money/Household-Budget-Management-Top-Online-Tools.html
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- Peterson, Palyn. "Tips For Living On A Budget." DebtSteps.com. http://www.debtsteps.com/living-on-a-budget.htm
- Ulrich, Carmen Wong. "How to Budget Your Money," cnbc.com, July 30, 2008. http://www.cnbc.com/id/25933653/How_to_Budget_Your_Money
- Warren, Elizabeth and Tyagi, Amelia. "All Your Worth." Free Press. 2005.