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What is a Realistic Budget and How Can We Build One?

Mapping out a monthly budget is an important pillar of financial responsibility. The trouble, however, is that sticking to your defined budget is often much easier said than done; How many times have you set a weekly spending limit, only to overextend it, or even forget about it altogether the moment unexpected expenses begin to pile up? How many times have you been out on a weekend and notice that the budget you built doesn’t account for your spending on nights out?

This is where the realistic budget comes in.

A realistic budget is a monthly plan that takes into account not only what our spending should include, but also considers what our expenses actually include.

The Expected

Naturally, our most significant expenses are our recurring monthly bills – mortgage, car payments, insurance, phone plans, internet, tuition, rent, etc… These are the expenses we must first take into account when building our budget, as they are essential and reoccurring. The first step is to make sure we have enough set aside to cover all of that. Next, we need to start accounting for any unexpected spending life might throw our way…

The Unexpected

In a perfect world, our monthly spending would not exceed the expenses listed above. However, this world is not perfect, and our expected expenses tend not to include that surprise wedding gift for a close friend or the bike repair we may suddenly need with no prior warning, to name just a couple of examples. This is where the need for emergency and entertainment funds come in. Try setting a small amount aside each week for just these purposes. It doesn’t need to be a large amount – even just $25 for each can do the trick. You’d be surprised just how quickly these amounts can begin to stack up. Start now, and before you know it, you’ll find yourselves with significant sums set aside for both pleasant surprises and rainy days. For emergencies, this can make all of the difference in the world.

Don’t Set Yourself Up to Fail

A realistic budget should take your lifestyle into account and have you plan for it accordingly – If a night out costs you an average $50, and you are setting aside just $25 every week, you are spending outside of your defined budget, making light of your self-imposed limits. This behavior can be detrimental to financial responsibility for obvious reasons, and must be avoided. The smart move is to anticipate your expenses realistically, and plan accordingly and responsibly. It really is that simple.

Reduce Wherever Possible

Being realistic and planning for expenses should always come alongside legitimate efforts to reduce your monthly spending as much as possible. What good is mapping out expenses if you can’t afford them in the first place?

A good place to start would be to find creative ways to minimize your monthly bills, as their recurring nature can cause us to either accumulate savings, or bring about repeated (and unnecessary) overspending. Try using methods such as bill negotiation to reduce your phone or internet bills – this can be done by yourself, or with the help of apps and services such as EZsave. Reducing rent by taking on a roommate or moving in to a smaller place is something to seriously consider as well. You can also seriously save on food expenses by finding cheaper places to shop, as well as limiting our grocery runs and not eating out or ordering in. You would be surprised how much of a difference this can make.

Have foresight, anticipate your needs, cut spending where you can and plan ahead for where you can’t. You don’t need to be perfect – you just need to be honest and realistic. 

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