WalletHub’s “Ask the Experts” features new thought leadership from Northwood University Professor Dr. Patricia Timm.
Dr. Timm, who teaches Accounting at Northwood University, discusses the benefits and challenges of budgeting. She also shares the following tips for people to create and stick to a budget:
- Be realistic. Cutting out all discretionary spending is not sustainable. A budget isn’t meant to deprive you of all fun, but rather a way to develop a realistic balance between short-term enjoyment and long-term goals. Take time to prioritize funding areas that help you meet your goals.
- Be flexible! Your budget will evolve over time. The first month’s budget may indicate that the original estimates were incorrect. It is OK to make changes. Life circumstances will also change over time. A budget will evolve and improve with more information and experience.
- Don’t forget about the expenses that are not regular. For example, bills that are paid every three months, gifts, vacations, and repairs. Set aside a portion each month for these future expenses so you have the money when needed.
- Set up multiple savings accounts for those future expenses. You can have an emergency account, a vacation account, or whatever works for your situation.
- Some people use all cash and have an envelope system. They set up envelopes with only the budgeted cash for the month. If you go over, you need to borrow from another envelope, it is a visual indicator that you must either change your future budget or save money in another area.
- Do not forget to set aside money for savings and emergencies.
- Enlist a friend or family member to work on your budgets together. Sharing the process and the challenges with someone else can keep you focused. Perhaps you will keep each other accountable.
- Do not give up! An imperfect budget is better than no budget at all. Reward your progress, not perfection.
Read all of Dr. Timm’s insight on this topic at: https://wallethub.com/edu/b/what-is-a-budget/142825#expert=Patricia_Timm
