Setting Goals and Monitoring Progress
I've found that the single most effective way for me to stay tightly to a meager budget is to set an ambitious goal and to monitor my progress toward that goal. The goal has to be something large but definitely attainable, and I typically try to shoot for something 3-5 years down the line. Without the goal, the budget becomes tedious and annoying, but with the goal, the budget suddenly has purpose, and I can follow it much more easily, down to the final penny. The goal could be something like "pay off my American Express card," "develop an 8-month emergency fund," or "save up for tuition for classes." I would avoid smaller things like "buy a new stereo" or "take a trip to the beach," though those certainly help for intermediary goals and rewards. By "ambitious goal," I generally mean "life-altering," like freedom from debt, professional development, etc. Using Quicken's forecast function, I plot out my expenses on my budget, and I can see, in a line graph, just how much my money grows if I stick to the budget. By shaving dollars here and there, like by deciding to walk three times a week instead of use the bus, I can see the long-term effects of each decision. Dollars saved each day turn into hundreds saved each year. I can also estimate the potential dents of any major purchases I'm planning, along with the actual dents of my recent financial decisions. Once I'm certain that my budget will point me toward financial success, I write down exactly where I need to be in the next month, 3 months, 6 months, etc., so I can monitor my progress as I hit each milestone. I also take a quick step back every weekend to examine my spending for the past week and adjust my spending for the coming week accordingly. I know this may sound unnecessarily neurotic, but since following this method of goals and monitoring, I've paid off two credit card bills, and I've developed an emergency fund that will last me 4.5 months, when previously I had stayed more-or-less afloat financially. I've found it much easier to say "no" to the little luxuries like takeout food in the middle of the week or Internet in my house, because my eyes are on the larger goal ahead of me, and I can see that goal coming closer and closer each week. The budget suddenly has a purpose, and it's a purpose that's meaningful to me. And best of all, when I do find that I've underspent my budget, I can spend the leftover cash entirely guilt-free as a little reward to myself for staying on track!