How to Create an Effective Budget


There’s so much excitement this month of resolving to eat healthier, exercise more, spend more time with loved ones, write the next Great American Novel, or learn the guitar. According to a UK-based study, the most popular New Year’s resolution of 2013 is to save more money. The importance of saving money cannot be stressed enough, as financial difficulties are among the most worrisome issues that keep people from feeling happiness and satisfaction in life. Taking responsibility for your finances is within your reach and only requires your resolve to do what it takes to save more money and effectively manage your finances. The most effective way to save more money to create an effective budget – one that is personalized to you and your financial goals.

Budgeting does not have to be difficult or boring. In fact, once you begin, it’s very easy to budget! Creating an effective budget cannot be done without a little forethought. Usually, people think have an idea of how they spend their money when in reality they are quite far off. Take a week and track every single one of your expenses for that week. Track what you bought, how much it cost, and then categorize the expenditure. You can do this by whatever method works for you. Most people find that a tool like the online UCCU Money Manager works best because the expense is tracked for you – all you have to do is categorize it. Plus, the Money Manager is conveniently there on the online Personal Branch, giving you one location for you to handle all your financial tasks.

Once you have spent about a week tracking your expenses, you’ll have a more realistic picture of how you’re really spending your money. Most people don’t realize that those two or three dollar expenses every day can really add up, or that they subconsciously put a lot aside for one particular category when really then don’t actually use as much as they usually put aside. Reviewing your saving habits is the first step to building a budget that will work for you.

Next, identify what categories of your spending are consistent and absolutely necessary, such as a loan payment, bills, utilities, or transportation. These are the budget items that are cemented into your budget, no matter what. They are the top priority budgeting item. After you have determined your permanent expenses, look at your other categories of spending. Choose a reasonable amount for the month (or week) that you can commit to keeping under, based on your spending choices that you tracked during the week previous. Give yourself realistic thresholds as your goals for each category.

Once your goals are in place, your budget is complete. It becomes an effective budget when you have taken this time to really study and evaluate your spending habits and build a budget around that data. To use your new budget effectively, you must simply be dedicated to staying within your allotted spending amounts you set for each category. If you build your budget effectively, the goals should be realistic and attainable, which will, in turn lead to better financial habits, all due to your personalized and effective budget.

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