What Makes a Good Budget?

Are there specific actions you can take to make sure your budget is solid? Is there even such a thing as a good budget? According to Deborah Fowles, former guide at the About.com financial planning section,

“In all the the budget bloopers and and blunders I’ve seen, the same few problems keep rearing their ugly heads.”

With that, Deborah provides the top ten most important features of a successful budget. A few of those features include:

1. Categories that fit your personal situation and your spending habits, not somebody else’s.

2. Enough categories to give you a meaningful picture of where your money goes and where you might be able to cut costs, but not so much detail that tracking is a chore that you’ll soon tire of.

I’ve written about these exact points before. If your budget is too detailed, you’ll spend way more time than you need only to quit in frustration. And why stick to a category because someone else suggests it? Use categories that make sense for you.

And the most important feature in my opinion,

“Realistic written goals. Budgeting isn’t about tracking your costs, it’s about setting financial goals (saving for a downpayment on a house, buying a new car, getting out of debt, saving for retirement, putting your kids through college, traveling, etc.) and finding ways to meet them. Without goals, your budget is just a pair of handcuffs.”

Budgeting is a goal setting and achieving exercise not, as many assume, an arbitrary spending restraint system. It’s only restraining in that you’re funneling your spending (and foregoing something in the short term) in order to fund a long term goal. A very satisfying exercise indeed.

Read the rest of Deborah’s article.

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