Answer: Very effective! After starting a budget people often neglect one of the most important things … setting goals. I know, I know, there’s so many goals you have to set in life! Setting goals for your budget is just another way to ultimately help you save more money so you can be financially free. Who doesn’t want to be free from the bondage of your money??
If you haven’t set up a budget yet then you can read my step-by-step guide HERE.
Why do I NEED to Set Goals for my Budget?
You’ve made a budget, you’ve figured out how much you spend in each category, you still aren’t saving money. I see this all the time! You can make a budget and stick to it but if you aren’t actively trying to reduce your expenses in each category there is no way you’ll be able to save extra money. A budget is just a guideline to see where your money is going and ultimately how much money you have every month. It’s there to give you an outline of your financial life, it is the frame for saving money. Now that you have your frame built, you need to finish the inside (I watch way too much HGTV.) Evaluate your categories in your budget. What categories can you reduce? What ones are significantly higher than the rest?
Setting the Goals
Once you’ve figured out what categories need major renovation (again, I have an obsession … thanks Chip and Joanna!) You need to think about what kind of goals you want to set. The goals that I have for my budget are reducing grocery costs every month, reducing utilities and reducing our misc category. Every month I see that my husband and I spend so much in these categories and I just KNOW that we could reduce those and ultimately save more money.
Once you have your budget set and have been keeping track of your expenses every month evaluate how much you are spending in each category. Then think of what you WANT to spend in each category, or what your expense goal is in each category. Write. That. Down. Write what you want each category to be in my handy dandy Budget Goals Template. (of course I included a template, who doesn’t love printable templates?!) There are certain categories that you can’t change and will be fixated every month and that’s okay. Just look at the ones that you CAN change.
I have a Secret …
Now, I want to tell you something. I hate setting goals. I love planning and budgeting but I hate setting goals. In the long run I still do it. You know why? Because it totally works. Yup, that’s why almost everyone tells you to set goals. It’s something you can turn back to be your little motivator to keep going. It’s just one of those things in life you have to do. So, if you want financial freedom then setting goals is part of that.
Click HERE to get access to my resource page to download the template for free.
Now that you have your goals written down figure out ways that you can actively hit that amount and reduce your expenses. If one of your goals is to reduce your expenses in your grocery category then search for ways to reduce grocery costs. (or check out my post HERE of the 5 best ways to reduce your grocery costs.) Remember I said actively, so you’ve got to do a little bit of homework. My homework currently is figuring out ways to reduce our utilities, especially our electric bill.
Now, try your hardest to hit that goal every month. It’s that easy! I always say this in my posts and I will say it again, if you want to save money you have to JUST START. Setting goals is the easy part, it’s the doing part that takes a little bit more effort. Once you start reducing your costs you realize how easy it was to begin with.
Evaluate your goals
After a month of having set goals for your budget reevaluate. Did you hit the mark? Did you totally miss the mark? Either way, it’s okay. You’re trying, you’re doing, you will succeed. Make new goals based on your evaluation. You aren’t going to get all the categories you want reduced immediately, it takes time and patience. Start out by just lowering it $50 and then increase it by another $50 and so on, until you’ve made it to the amount you want to be at.
Once you hit your number you’ll feel great. Once you reduce your costs there’s that much more money you can use to pay off your debt or put in savings. You are well on your way to financial freedom! Just remember to not get discouraged, it’s the little things you do that can pay off in the end.
What are some goals that you have for your budget?
themodestfoxpr says
This is a very useful post. Many young adults and adults struggle with making economically viable decisions and end up with no money at the end of the month; they don’t track what they spend and they don’t save money. I love to do what you’ve discussed in this post and I second this motion, it is very effective!
McKenzy Potter says
Thanks so much! I’m glad you agree. It isn’t very effective to just have a budget without setting goals if you want to save money, the hard part is just tracking what you spend. I feel most people don’t track it because they feel guilty. I always feel guilty after going through my expenses because there’s always things I didn’t need, but it’s just even more motivation to set higher goals for my budget the next month 🙂