The Essential Guide to Budgeting - Part 2: Sticking to Your Budget
- Davina Jackson
- Feb 16, 2024
- 15 min read
Updated: Mar 8, 2024
Welcome to The Woman CFO – a space crafted just for you, where we embark on a journey of financial empowerment.
This post is part 2 of a 2-part series on budgeting.
Welcome back to The Essential Guide to Budgeting series. In part 1, we covered the basics of budgeting, laying the groundwork for financial success.
In today's post, the finale in our budgeting series, we're going to cover everything from tracking your spending and overcoming budget challenges to treating yourself responsibly and finding support along the way.
It's time to roll up our sleeves and get down to business. Are you ready? Let’s go.
Instant Gratification Zone: Skip to the Good Stuff
Navigating Your Budget Journey
Building a budget is just the beginning of your financial journey.
The next step is understanding how to navigate your budget with confidence and clarity.
Let’s dive back into our guide and look at essential strategies and practical tips that can help you effectively manage your finances and stay on track with your budgeting goals.
Budget Essential #4: Sticking to Your Budget
Budgeting can be a game-changer when it comes to managing your finances effectively and achieving your financial goals.
But, while creating a budget is an essential first step, sticking to a budget will help you stay disciplined with spending, ensuring that you're making the most of every hard-earned dollar.
We've compiled 5 practical tips for sticking to your budget that are simple to implement and maintain:
Track Your Spending Regularly
Review Your Budget Regularly
Make Adjustments as Needed
Use Cash for Discretionary Spending
Practice Delayed Gratification
Find Accountability Partners
Practical Tip 1: Track Your Spending Regularly
Regularly tracking your spending allows you to see where your money is going and identify any areas where you may be overspending.
For example, let's say you budgeted $200 for groceries for the month but find that you've already spent $250 halfway through the month.
By tracking your spending, you can adjust your budget accordingly and find ways to cut back on non-essential expenses to stay within your grocery budget for the rest of the month.
How to implement tracking your spend: Monitor your expenses by comparing them to your budgeted amounts to ensure that you're staying within your limits.
Use budgeting apps like YNAB or Nerd Wallet, or maintain a spending journal like Clever Fox's Budget Book, or go manual by review your bank and credit card statements.
Practical Tip 2: Review Your Budget Regularly
Life circumstances and financial situations can change, so it's essential to adjust your budget accordingly to reflect these changes as well as make sure you remain aligned with your financial goals and priorities.
What to Do in Your Budget Review
Assess Progress: Compare your actual spending and savings against your budgeted amounts to identify areas where you're excelling and areas that need adjustment.
Identify Trends: Look for spending trends or patterns that may emerge over time. For example, grocery expenses that have been consistently higher than anticipated should prompt you to explore ways to cut costs in that area.
Adjust Priorities: Reassess your financial priorities and make adjustments as needed.
Prepare for the Unexpected: Set aside funds for emergencies and unexpected costs so you can mitigate the impact on your overall financial plan.
Stay Motivated: Celebrate your successes, no matter how small, and use any setbacks as learning opportunities to improve your budgeting skills over time.
When to Do Your Budget Review
Monthly: Set aside time each month to review your budget and track your spending. Use this time to update your budget with any changes in income or expenses and assess your progress towards your goals.
Quarterly: Every 3 months, take a deeper dive into your budget to identify any long-term trends or patterns. Look for areas where you can make improvements or adjustments to better align with your financial objectives.
Annually: At least once a year, conduct a comprehensive review of your budget to reflect on your financial accomplishments and set new goals for the upcoming year. Consider factors such as changes in income, expenses, and life circumstances that may impact your budgeting strategy.
We suggest doing a mix of monthly, quarterly and annual reviews to ensure effective financial management.
This way you pay attention to items that need constant review (such as pending habits), items that need periodic check-ins, as well as long-term financial goals, milestones, and accomplishments.
Practical Tip 3: Make Adjustments as Needed
Once you've reviewed your budget, it's time to make any necessary adjustments to ensure that it remains effective, aligned with your financial goals, and adjusted to changes in your life circumstances.
How to Implement Budget Adjustments:
Cut Expenses: Identify areas where you can reduce spending, such as dining out less frequently, cancel unused subscriptions, or negotiate lower bills.
Increase Income: Explore opportunities to boost your income, such as taking on a side hustle, asking for a raise at work, or selling items you no longer need.
Re-allocate Funds: Evaluate your spending priorities and consider reallocating funds from non-essential categories to areas that align more closely with your goals.
Update Goals: Review your financial goals regularly and make adjustments as needed based on changes in your circumstances or priorities.
Seek Professional Advice: If you're unsure how to make adjustments to your budget or need help navigating complex financial decisions, consider seeking advice from a financial advisor or counselor.
Practical Tip 4: Use Cash for Discretionary Spending
Using cash for discretionary spending can be a powerful budgeting strategy that helps you manage your money more effectively.
It helps you limit spending, track expenses, and avoid unnecessary debt.
It also supports budget control by making you more “money aware”.
How to implement using discretionary spending: Withdraw a set amount of cash each week or month and use it to cover discretionary expenses like dining out, entertainment, and shopping.
Once the cash is gone, no more spend is allowed until the 'bucket' is refilled at the next budget review.
Make sure you resist the temptation to dip into other funds or use credit cards to supplement your spending.
Money Tip: The envelope system (or Cash Stuffing), mentioned in part 1 of this series, is a popular method for implementing cash-based budgeting.
Allocate funds to different envelopes for each spending category and only use the cash from each envelope for its designated purpose.
Practical Tip 5: Practice Delayed Gratification
Delayed gratification is a powerful mindset shift that can help you make smarter financial decisions and stay within your budget.
Instead of giving in to impulse purchases or instant gratification, take a step back and ask yourself if the purchase aligns with your long-term financial goals and priorities.
Delayed Gratification in Practice:
Saving for Big Purchases: Instead of making impulse purchases on expensive items like electronics or vacations, set a savings goal and save up for these purchases over time. This allows you to enjoy the satisfaction of achieving your goal while avoiding debt and overspending.
Contributing to Retirement: Prioritize long-term savings over immediate consumption. By consistently contributing to retirement accounts such as 401(k)s or IRAs, you can build a nest egg that will provide financial security in your later years.
Paying Off Debt: Prioritize debt repayment over making discretionary purchases. Allocate extra funds towards paying down high-interest debt, such as credit card balances, rather than spending money on non-essential items.
Investing for the Future: Instead of spending money on luxury goods or experiences, consider investing your funds in assets that have the potential to grow over time, such as stocks, bonds, or real estate.
Money Tip: Before making a non-essential purchase, give yourself some time to think it over. Put the item on hold or add it to a wish list and revisit it after a few days or weeks. You may find that your desire for the item diminishes over time, saving you money and preventing buyer's remorse.
Practical Tip 6: Find Accountability Partners
Finding financial accountability partners involves forming relationships with individuals who can offer support, guidance, and encouragement in achieving your financial goals.
These groups can offer valuable insights, tips, and encouragement from others who are on a similar financial journey:
Friends or Family
Online Communities (hello from The Woman CFO)
Financial Coaches or Advisors
Workplace Groups
Meetup Groups
Budget Essential #5: Overcoming Budgeting Challenges
While budgeting can be empowering and rewarding, it's not without its hurdles and it's not always easy to stick to one - especially when faced with unexpected expenses, fluctuating income, or competing financial priorities.
This is particularly true for women.
Approximately 63% of women report facing significant challenges when it comes to budgeting and managing their finances effectively - The National Endowment for Financial Education (NEFE)
Let's look at some of the most common budgeting challenges women face and how to overcome them:
Budgeting Challenge 1: Irregular Income
Whether you're self-employed, freelance, or rely on commissions or bonuses, fluctuations in income can make it challenging to create a consistent budget.
Overcoming the challenge of irregular income requires careful planning, flexibility, and proactive strategies to manage cash flow effectively.
We recommend these strategies for overcoming irregular income:
Create a Bare-Bones Budget: This budget should represent the minimum amount you need to cover your basic needs each month - such as housing, utilities, and groceries.
Establish an Emergency Fund: Aim to save at least 3-6 months of living expenses to cover unexpected dips in income or emergencies.
Average Your Income: If your income fluctuates from month to month, calculate your average monthly income over the past year or several months. Use this average income figure as the basis for your budgeting calculations.
Prioritize Expenses: Prioritize your expenses based on necessity and urgency. Allocate your income first towards essential expenses such as housing, utilities, and groceries. Then, allocate funds towards non-essential expenses such as entertainment or dining out.
Use Envelope Budgeting: Envelope budgeting involves allocating funds for different spending categories into separate envelopes or accounts. Allocate a portion of your income to each envelope, and only spend from each envelope as needed.
Embrace Zero-Based Budgeting: Zero-based budgeting involves giving every dollar a job, ensuring that your income minus expenses equals zero. This approach helps you make intentional decisions about how to allocate your income, even when it fluctuates.
Create a Buffer: Consider building a buffer in your budget to account for fluctuations in income. Set aside a portion of your income each month to cover any income shortfalls or unexpected expenses.
Diversify Income Sources: Explore opportunities to diversify your income sources to create more stability. This could involve taking on freelance work, starting a side business, or investing in income-generating assets.
Track Your Expenses: Keep meticulous track of your expenses to monitor your spending habits and identify areas where you can cut back. Use budgeting apps or spreadsheets to track your income and expenses in real-time.
Adjust as Needed: Be prepared to adjust your budget as your income fluctuates. If you experience a windfall or a lean month, adjust your spending accordingly to stay on track with your financial goals.
Dealing with Irregular Income in Practice: Let's say you're a freelance graphic designer, and your income varies from month to month.
During months when you earn more than usual, allocate extra funds to your savings goals or debt repayment.
During leaner months, tighten your belt and focus on essential expenses until your income stabilizes.
Budgeting Challenge 2: Resisting Lifestyle Inflation
As your income increases or your financial situation improves, you may be tempted to increase your spending and upgrade your lifestyle.
While we're all for treating yourself occasionally, falling into the trap of lifestyle inflation can derail your budgeting efforts and hinder your progress towards financial goals.
Resisting lifestyle inflation requires discipline, mindfulness, and strategic financial planning to avoid increasing expenses as income grows.
Keep these strategies in mind:
Set Clear Financial Goals
Differentiate Needs from Wants
Stick to a Budget
Automate Savings and Investments
Practice Mindful Spending
Avoid Comparison
Celebrate Milestones, Not Spending
Reevaluate Regularly
Resisting Lifestyle Inflation in Practice: Let's say you receive a significant raise at work. Instead of immediately upgrading to a larger home or fancier car, consider allocating a portion of the extra income to retirement savings or paying off debt faster.
By resisting the temptation of lifestyle inflation, you can make smarter financial decisions and stay on track with your budgeting goals.
Budgeting Challenge 3: Handling Unexpected Expenses
Unexpected expenses are an inevitable part of life that can throw a wrench into even the most carefully crafted budget.
Whether it's a car repair, medical bill, or home maintenance issue, unexpected expenses can quickly derail your budgeting efforts if you're not prepared.
With careful planning and preparation, you can navigate these financial hurdles effectively.
Here's how:
Build an Emergency Fund: Aim to save at least three to six months' worth of living expenses in a separate savings account. This will act as a financial safety net, providing you with the funds you need to cover unforeseen emergencies without derailing your budget.
Prioritize Savings: Make saving a priority in your budget by allocating a portion of your income towards various savings goals, such as an emergency fund, retirement savings, and other financial goals. By consistently setting aside money for savings, you'll be better prepared to handle unexpected expenses when they arise.
Review and Adjust Your Budget: Regularly review your budget to identify areas where you can cut back on expenses or reallocate funds to cover unexpected expenses. Look for discretionary spending categories where you can trim expenses temporarily to free up additional funds for emergencies.
Consider Insurance Coverage: Evaluate your insurance coverage to ensure you're adequately protected against various types of unexpected expenses, such as medical emergencies, car accidents, or home repairs. Having the right insurance policies in place can provide financial peace of mind and help mitigate the impact of unexpected events on your budget.
Explore Additional Income Sources: Consider exploring additional income sources to supplement your primary source of income and provide an extra financial cushion for handling unexpected expenses. This could involve taking on a part-time job, freelancing, or monetizing a hobby or skill.
Handling Unexpected Expenses in Practice: Your car breaks down unexpectedly, and you need to pay for repairs. Instead of panicking and putting the expense on a credit card, you can use funds from your emergency fund to cover the cost without disrupting your budget.
Budgeting Challenge 4: Managing Debt Effectively
Debt can be a significant obstacle to financial freedom and can make budgeting feel like an uphill battle.
Whether it's student loans, credit card debt, or a mortgage, managing debt effectively is essential for achieving your financial goals and maintaining financial stability.
Here's an in-depth look at overcoming the budgeting challenge of managing debt:
Understand Your Debt: Start by understanding the types and amounts of debt you owe. Make a list of all your debts, including credit cards, student loans, mortgages, car loans, and any other outstanding balances. Note the interest rates, minimum monthly payments, and repayment terms for each debt.
Create a Repayment Plan: Develop a comprehensive repayment plan to systematically pay down your debts. Consider using strategies such as the debt avalanche method, where you prioritize paying off debts with the highest interest rates first, or the debt snowball method, where you focus on paying off debts with the smallest balances first.
Budget for Debt Repayment: Allocate a portion of your monthly budget towards debt repayment. Determine how much you can afford to pay towards your debts each month while still covering your essential expenses and savings goals. Adjust your budget as needed to ensure that you're making progress towards paying off your debts.
Reduce Expenses: Look for opportunities to reduce expenses and free up more money for debt repayment. Cut back on discretionary spending, such as dining out, entertainment, and non-essential purchases. Consider renegotiating bills or switching to cheaper alternatives to lower your monthly expenses.
Increase Income: Explore ways to increase your income to accelerate debt repayment. Consider taking on a side job or freelancing, asking for a raise at work, or selling unused items to generate extra cash. Apply any additional income towards your debts to pay them off more quickly.
Seek Professional Help if Needed: If you're struggling to manage your debt on your own, consider seeking professional help from a credit counselor or financial advisor. They can provide personalized guidance, help you develop a debt repayment plan, negotiate with creditors on your behalf, and explore options such as debt consolidation or settlement.
Budgeting Challenge 5: Seeking Support and Accountability
Finally, don't be afraid to seek support and accountability as you navigate your budgeting journey.
Whether it's joining a financial accountability group, working with a financial coach, or enlisting the help of a trusted friend or family member, having support can make all the difference in staying motivated and accountable to your financial goals.
Surround yourself with people who share your financial values and can offer encouragement, advice, and accountability when needed.
Celebrate your successes together and lean on each other during challenging times. Remember, you don't have to go it alone – there's strength in community and support.
By seeking support and accountability through these various avenues, you can overcome budget challenges, stay motivated, and make meaningful progress towards your financial goals.
Budget Essential #6: Celebrating Budgeting Wins
Budgeting can sometimes feel like a daunting task, but it's essential to recognize and celebrate your progress, no matter how small.
By acknowledging your achievements and celebrating your successes, you'll stay motivated and inspired to continue on your financial journey.
Here's how:
Celebration 1: Acknowledge Your Achievements
The first step in celebrating budgeting wins is acknowledging your achievements, no matter how modest they may seem.
Whether you've successfully stuck to your budget for a month, reached a savings milestone, or paid off a significant chunk of debt, take a moment to pat yourself on the back and recognize your hard work and dedication.
Acknowledging Your Achievements in Practice: If you successfully stick to your budget for the month, take a moment to acknowledge the accomplishment. Reflect on the positive impact of your efforts, such as reducing debt or increasing savings, and give yourself credit for your hard work and discipline.
Celebration 2: Set Milestones and Goals
Setting milestones and goals is another effective way to celebrate budgeting wins and track your progress over time.
Break down your long-term financial goals into smaller, more manageable milestones that you can celebrate along the way.
Setting Milestone and Goals in Practice: If your goal is to pay off $5,000 in credit card debt, set milestones at every $1,000 paid off. When you reach each milestone, celebrate your progress by treating yourself to a small reward, such as a nice dinner or a movie night at home.
In addition to celebrating financial milestones, set non-financial goals related to your budgeting journey, such as establishing a consistent budgeting routine, reducing impulse spending, or increasing your savings rate.
Celebrate these achievements just as enthusiastically as you would a financial milestone, recognizing the positive impact they have on your overall financial well-being.
Celebration 3: Treat Yourself (Responsibly)
While it's important to prioritize your financial goals and stay disciplined in your spending, it's also essential to treat yourself occasionally as a reward for your hard work and dedication.
Treating yourself doesn't have to break the bank – it can be as simple as enjoying a coffee date with a friend, treating yourself to a spa day at home, or indulging in your favorite dessert.
When treating yourself, be mindful of your budget and choose activities or purchases that align with your financial goals and values.
Avoid splurging on impulse purchases or overspending in celebration, as this can undermine your progress and derail your budgeting efforts.
Instead, focus on meaningful experiences or purchases that bring you joy without compromising your financial stability.
Treat Yourself in Practice: If you achieve your savings goal for the month, reward yourself with a reward that doesn't break the bank, such as a relaxing bubble bath, a spa day at home, or a movie marathon with friends.
Celebration 4: Share Your Successes
Sharing your budgeting successes with others can amplify your feelings of accomplishment and provide inspiration and encouragement to those around you.
Whether it's sharing your progress on social media, discussing your achievements with friends and family, or participating in online communities or support groups, don't be afraid to celebrate your wins publicly.
By sharing your successes, you not only celebrate your own achievements but also inspire and motivate others to take control of their finances and embark on their own budgeting journeys.
Celebrate together, support each other, and celebrate the collective progress of women empowering women towards financial independence.
Share Your Successes in Practice: Share your budgeting successes on social media, in a group chat with friends, or during a family dinner. By sharing your wins, you inspire others to pursue their financial goals and create a supportive community around your achievements.
Celebration 5: Reflect and Recharge
Take time to reflect on your budgeting journey periodically and recharge your motivation and enthusiasm for the road ahead.
Set aside time to review your progress, reassess your goals, and identify areas for improvement.
Celebrate how far you've come and use any setbacks or challenges as learning opportunities for growth.
Reflect and Recharge in Practice: Regularly review your budgeting wins and milestones to track your progress over time. Create a visual representation of your achievements, such as a savings thermometer or a debt payoff chart, to see how far you've come and celebrate your continued success.
Take care of yourself and prioritize self-care as you navigate your budgeting journey.
Remember that achieving financial success is a marathon, not a sprint, and it's essential to pace yourself and maintain balance in your life.
Reflect, recharge, and recommit to your financial goals with renewed energy and determination.
Celebration 6: Stay Consistent
Lastly, celebrate budgeting wins consistently and regularly to maintain momentum and motivation.
Incorporate celebrations into your routine to make them a natural part of your financial journey and reinforce positive habits.
Staying Consistent in Practice: Schedule regular check-ins with yourself or your financial support network to celebrate budgeting wins and milestones. Whether it's weekly, monthly, or quarterly, set aside time to reflect on your progress and reward yourself for your efforts.
The Finale: Celebrating Your Budgeting Success
We’ve reached the end of our two-part series on mastering the art of budgeting, can you believe it?
Let's take a moment to reflect on all that we've learned and achieved together.
In Part 1, we covered the fundamentals of budgeting – from understanding what budgeting is all about to exploring different methods for building a budget that works for you.
In today's Part 2, we delved deeper into the practical aspects of sticking to your budget. We shared tips and strategies for staying disciplined with your spending, setting realistic goals, treating yourself responsibly, and finding support along the way.
As we wrap up this series, I encourage you to take what you've learned and apply it to your own financial journey.
Set aside time to review your budget, reassess your goals, and celebrate your progress.
Remember that budgeting is a marathon, not a sprint, and it's okay to adjust your plan as needed along the way.
Until next time, keep budgeting, keep celebrating, and keep shining bright!
Ready to embrace your inner CFO? Join our community. Share your financial goals, budgeting tips, and success stories in the comments.
