The Wall Street Journal walks through its own Budgeting 101 course, examining what makes a budget so hard to stick to and how to create realistic budgets that actually fit your fluctuating spending habits.
Think about your life for a moment. Do you make the exact same purchases every single month? Of course not. What you buy differs from one month to the next. Yet many people use the “average cost per month” approach to budgeting, so that in any given month they can spend an average of $150 on clothes, and an average of $100 on a vacation, and an average of $300 on eating out, and so on.
As we all know from experience, your spending doesn’t always fit well into such strictly defined boxes—which is why it’s so easy for your budget to break. Photo by Jeff Keen.
You don’t take a vacation every month, and the vacations you do take aren’t costing you $100 when you take them. More important, you’re not saving that $100 each month to cover the vacations when they do arise. You’re spending the money on other items and then, when the vacation pops up, you’re shoving the full cost–well more than $100–onto a credit card because the budget isn’t prepared to handle the outsized outlay.
Instead of taking the all-too-common “average cost per month” approach, the author suggests managing your discretionary income on a per-month basis, which means determining how much you can actually afford to spend and then deciding how you want to allocate that cash. You may not be eager to take budgeting advice from a publication named after Wall Street, but it really is a worthwhile read. Whether or not you follow similar budgeting tips, let’s hear more about how you stick to a budget in the comments.