Create an (almost) perfect budget

By Jennifer Rose Hale

If only we lived in a world where it is really possible to create your perfect monthly budget. However, in my world, I'm waiting for the Sears repairman to come and fix the washing machine--a job that will probably cost $200 and that I certainly didn't plan for.

First lesson: There is no such thing as a perfect budget.

But--and this is a big "but"--the fact that I knew what I planned to spend this month turned this unexpected expense into something that could be dealt with. With a few changes, such as a smaller deposit into my online savings for a new car and waiting a few weeks for vacation clothes, I'll pay today's bill from my checking account.

If you're tired of not knowing exactly what's coming in and, even worse, where it's going, a monthly budget can bring you peace of mind. So, take a deep breath, grab some paper or your laptop and take comfort in the fact that your budget doesn't have to be perfect.

Learn from history

Not sure where to start? Look to your recent past. After you record your regular, fixed expenses--rent, phone, car payment--look at expenses that change every month. Some, you can estimate pretty easily. Review charges for gas over the last few months to get a good idea of what you spend. Same with electricity. Adjust up or down based on how hot it is outside or if you're planning to be away from home for an extended period. Eventually you'll know your utility bills well enough to save money in warm weather.

For others, you'll do some educated guessing. How often do you buy clothes? What do you usually spend? Credit card bills and debit statements will help. If you can generally piece together what you've spent recently, you can decide whether next month's clothing budget will be $50 or $250.

Honesty: the best policy

If there's one guideline for successful budgeting, it's this: Be honest. No, really--totally honest. If you record that you spend $100 going to restaurants with friends but really spend $225, you're going to feel like you're on a bad diet--the kind no one stays on for long. Yes, budgets allow you to change your spending habits, but if you try to change them too much--if you go on a spending starvation diet--you'll fail before you reach your goals.

That doesn't mean you can't learn to save on gas, for example. But knowing how much you spend now is the fastest way to adjust those numbers downward.

All the small things

Those magazines in the checkout aisle will get you. The spur-of-the-moment Starbucks runs, the five bucks you donate to an office charity or leave as a tip may seem too negligible to write down and are easy to forget. But a few of those $5 payouts a week can add up to $100 or more over a month that's not accounted for in your budget.

Here's where tools come in handy. If you're old-school, carry a little notepad and pencil in your car or bag, and write things down a few times a day. But you can find online tracking tools that are just as convenient, and can be accessed from any computer or device. Kiplinger has one, for example, or use a Google Docs template.

Build in treats

It can't be stressed enough: Those magazines, coffee stops and, yes, donations to charity--they're all part of your real life. Cut them out entirely and life loses its flavor. (Here we are, back to the diet metaphor.) Planning ahead for those grocery-store whim purchases won't make them any less enjoyable. You may find that knowing you have the cash for them makes them less ripe for buyer's remorse.

Get an attitude adjustment

Some folks call a budget a "spending plan." A little renaming can make a difference--like a menu plan versus a diet. After all, just like food, we can't live without spending money somehow--for housing, food, transportation. And we improve our lives with other kinds of spending, whether making automatic transfers into our savings accounts or planning for that annual vacation.

And don't aim for perfection--there is no such thing. A workable budget may take a few months to get right. You'll forget items at first--like that you pay for car insurance twice a year--and you'll really want to believe that you can only spend $100 hanging out with friends.

In the end, the washer repair ran $167.01. With a few adjustments, that extra money went back into my savings account. While not perfect, in the end, the budget was pretty darned good.