Creating a Realistic Budget

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Confession time: I have a bad budget habit. Every month, I set aside a certain amount for groceries and EVERY MONTH, I go over budget. When I sit down before the beginning of each month, I plan to keep the grocery number as minimal as possible. At the end of every month, I find myself frustrated with how much we actually spent–we typically run out of money in that category around the third week of the month.

Why not just put more money in there? you might ask. That would be the obvious solution. But that assumes that this process is a logical one. Money is so strongly tied to emotion for me, that when there’s not enough, I feel uneasy and scared. Our goal of paying off all non-house debt is so deeply intertwined with my emotions at this point, that anything standing in the way of it feels stressful. So when I sit down to budget, I put down an optimistic number (RE: too little) for groceries, rather than a more practical one. Then when we inevitably run out of money in week 3, it starts to feel something like, oh well, we blew it. Might as well keep spending. Better luck next month. And that’s how we end up hundreds of dollars over budget.

If you are in the same boat as me, whether it’s your grocery budget, your entertainment budget, or something else, here are a few steps that we can take to set more realistic goals:

  1. Don’t assume next month will be the same as this month: Look at the entire month ahead. Will you need extra food for a party? Are you going out of town? Will you need to replace anything? Try to plan ahead for as many “knowns” as possible.
  2. Look at your spending history: If you generally spend an average of $125 a week on groceries, don’t put only $100 in the budget. Either figure out how to cut back, or make sure you have enough reserved in that category.
  3. Split the monthly budgeted amount up by week: I’ve found that I spend less when I take out enough cash for 1 week at a time, rather than focusing on the amount I have for the entire month.

What strategies do you have for creating a realistic budget?

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8 thoughts on “Creating a Realistic Budget

  1. Anne says:

    On #2, what has worked best for me is to go based on spending history while taking any special circumstances of the month int account as you suggest. Figuring out how to cut back is good, but if I cut back the budget to reflect what I know I can do, I don’t necessarily do it and then I ran into that problem you mention of spending more because oh well for this month. So what I’ve found to be really important for me is to make budget changes slowly; if I have $125 per week that I’m pretty sure I can do just $100 per week, I might set the budget at either $115 or even $125 per week. I have the goal of just $100, but know that if I do really well one week but not the next, I still have money there. Then let’s say I had the budget set at $125 per week but managed to do $110 per week. While that’s not the $100 I was aiming for, I was $15 under budget each week on average, and I know how that felt. I know also that, all else being equal about the months, I can set my budget for next month at $115 per week and should be able to do that no problem. I’ll be aiming for $100, but if I do the same as last month, I’ll still be within budget.
    The thing I sometimes forget when optimistically budgeting for myself is that spending is a habit, or actually a lot of habits, and it takes time to change habits. If I let my budget reflect what I want my spending to be without focusing more on changing the habits slowly and steadily, that’s when I am more likely to fail somehow, and binge-spend as a result. I do that enough and the binge-spend, the oh-well-I-might-as-well-spend becomes a habit. :/ That’s a tough one to break.

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  2. Anne says:

    That is, all the stuff you said is wonderful, and I’ve found I need to tie my budgets closer to spending history, with only a slight *budget* modification each month, otherwise I am more likely to give up on the budget at some point in the month. Then I’m able to stick with the budget better and pay off more debt which feels great 🙂 (may not be $25 a week, but if I go over by hundreds of dollars–which I have also done…–that’s $0 or worse per week, so $10 or $15 is good for a first month trying on a new budget)

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  3. meeperloves says:

    I’ve begun using cash only. I’ve found setting a monthly budget is extremely overwhelming for me and I can’t seem to find the right number. You’re right, each month is different. Sometimes I have to go out of town to work, or have things come up. I think having cash on a weekly basis is working for me (so far). In addition, having to physically pull money out of your wallet has a longer effect than swiping a card :). Glad I found your page! I recently started blogging so it’s quite inspiring to keep writing!

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    • thehappybudget says:

      Thanks for your comment! Cash is good, but definitely keep trying to nail down the budget. It might take a few months to get the hang of it, but once you do, you’ll feel such a sense of control over your money. Maybe try giving yourself a miscellaneous/flex money category for unexpected expenses. Keep an eye on what they are over the next few months, then budget the average amount going forward. That’s what I would probably do!

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