[Budget Plan: Part 4] Drafting Your Budget Plan

So we've set our financial goals, tracked down where our money is going and we've discussed our wants vs needs. Now we're all ready to draft our budget plan! Personally, the first time I ever did this, it was both exciting and a bit daunting. I wanted to put it off as much as I can, because having a budget felt like I will have to start having to completely deprive myself of my wants and occasional treats. It doesn't have to be seen that way though. A budget plan is simply a plan. It's just like writing a dreaded English paper--you start with an outline to start mapping your content rather than aimlessly rambling on. It's a simple extra step we can take to see where we are, what we want to achieve and hopefully get there with less stress.

TIP: Just keep in mind that your total expenses  do not exceed your total income. 

 Another Tip: When I'm creating my budget, I view my expenses in 2 major categories. We have our the monthly expenses and then there's the savings. We have to learn to think of expenses in both present  and future tense.

Look back and see what you've learned from tracking your expenses. Is your current spending pattern making sense? Were you aware of everything that you're paying for? Is your daily latte routine actually adding up to a fair bit of money? Look at your current list of monthly (or bi-monthly) expenses, and next to it, add a column with a revised budget plan. See what you can or should cut back on. Can you tuck more money away into savings? Are you spending more money than what you're making? The main objective of making a budget plan is not to limit ourselves but to start realizing our spending pattern, review it, and reflect on whether we're truly living within our means instead of spending money we don't have.

Also, remember those financial goals we made in the first step? Maybe you're saving for a down payment for your first home, or trying to make sure you're set for retirement. Whatever your goals were, try and assess whether your current spending pattern is allowing your to reach those goals. If not, then perhaps there are revisions to be done. Yes, perhaps this means something as little as going out for coffee less frequently. Or maybe spending less on something less pressing than an important goal; it isn't easy. Like I have mentioned before, it is a lifestyle change and it boils down to priorities. Just remember to not take it to the extremes! Don't do a total spending pattern makeover. Just as most fad diets do not work in the long run, totally depriving yourself and cutting your expenses down drastically can also be detrimental. Instead, make slow steady changes. Make budget revisions that are doable and realistic.

If you haven't registered for Mint or you have yet to write down your actual expenses, then you should! You can also try this budget worksheet, to get a quick look at how much you're actually spending on what and make the appropriate changes.

Don't Forget About the Rainy Days

It's difficult to think about saving money especially with all the bills and monthly payments (or when you have outstanding debt that you might be struggling to get ahead of). However, if we're really serious about trying to be more financially secure it is important to at least start working on building your emergency savings account.

Emergency savings, which, depending on your source could be 3-6 months salary's worth (I know, quite an intimidating amount!), is money put away in case of--yes you guessed it--emergencies. It's where you can dip into for seasonal and/or unexpected expenses; for living expenses if you're in between jobs, medical expenses not covered by insurance, etc. I cannot stress enough how important it is to start getting into the habit of saving for all those unplanned expenses rather than having to later on rely on credit and have a difficult time paying it back.

TIP: Don't get hung up on how much you should have set aside for savings. Just get it started!

 Disclosure: I am following the steps outlined in nomoredebts.org's Money Management Strategies. Head over to their website for more info and resources.