You are an unusual person. You saw the word “budget” in the headline and kept reading!

As your reward, we present below six ideas for getting the most out of a budget — a much-misunderstood personal-finance tool that can help make the most of what you have.

  1. Get your mind right.
    Surely you’ve heard someone say, “I’m on a budget.” It’s the same way people talk about trying to lose weight: “I’m on a diet.” (No wonder budgets and diets are disliked.)

    Let’s set the record straight. A budget isn’t something you “go on.” It’s a tool you employ to achieve specific ends.

    And contrary to common thinking, a budget isn’t about less (“I’m going on a budget because I have to spend less”). It’s about more: More information about your finances so you can be more intentional about your use of money and end up having more for the things that matter most to you.

    If you find the word “budget” unpleasant, strike it from your vocabulary! Instead, call it a “cash-flow plan” — because that’s what it is: a plan that lays out where your money will go.
     
  2. Choose the best tool for you.
    There is no single approach to using a cash-flow plan that works for everyone. You can use the envelope system, create an Excel spreadsheet, buy a software program, try an online tool, or just write your plan on plain ol’ notebook paper. (Also check out SMI's free Budget Quick-Start Guide and Recommended Cash Flow Guidelines.)

    The best tool for you is the one you’ll actually use, so choose what seems simplest and makes the most sense to you.

    That said, if you’ve never used a cash-flow plan before, you may find the envelope system or the pencil-and-paper approach particularly appropriate. Why? Because the learning curve for each is relatively simple, and it’s helpful to use a “hands-on” system at first. Six-to-12 months down the road, feel free to move to an electronic system.
     
  3. Keep it current.
    Many people quit using a cash-flow plan because they fall behind on recording their spending. Unable to remember what they spent or where, they become frustrated.

    If you get behind, don’t give up. If you don’t have receipts or statements to jog your memory, make estimates as to what you’ve spent recently, then determine to do better recordkeeping in the future. Set a daily reminder on your smartphone to record your spending. Eventually, good recordkeeping will become a habit.

    Apps and budgeting websites (when you’re ready for one) make recordkeeping much easier. Resources such as YouNeedABudget, the MoneyWise App, Tiller Money, and Mint can record all electronic transactions for you (pulling data from your credit cards and bank accounts).

    But even if you use an app or budgeting website, it’s wise to log on daily to enter your cash transactions — and to make sure the electronic resource you’re using has categorized your other spending correctly.
     
  4. Plan for maintenance and repairs.
    Unexpected expenses can be cash-flow plan killers. Maybe you’ve been humming along, staying within your spending targets for groceries, clothing, and entertainment when all of a sudden you have to buy new tires for your car. In an instant, your cash-flow plan turns upside down. It doesn’t have to be that way.

    You can plan for unexpected automotive expenses by allocating $100 to $125 per month per vehicle for maintenance and repairs, depending on the age and condition of your vehicles. Some months you won’t spend anything, but other months you’ll spend a lot. By allocating money to maintenance and repairs each month, you’ll have enough set aside for the big-expense months that beset all car owners.

    If you’re a homeowner, do the same for your house. Allocate at least $250 per month for maintenance and repairs.
     
  5. Remember who’s in charge.
    Although a cash-flow plan is a helpful form of financial accountability, it’s a tool that’s supposed to serve you — not the other way around. You have the discretion to change your plan, and you’d be wise to do so in certain situations.

    For example, maybe inflation is causing you to spend more on groceries than you planned month after month. You may have to allocate more than you initially expected. Of course, more money for groceries means less for other categories. But the process of making these kinds of adjustments is a normal part of using and refining a cash-flow plan.
     
  6. Get on the same page as your spouse.
    With most couples, one spouse typically takes to the mechanics of a cash-flow plan better than the other. That’s fine. Put that person’s strengths to work by having that spouse be the one to enter transactions.

    That doesn’t absolve the other person from responsibility, however. Both husband and wife must be supportive of the plan and accountable for staying within spending boundaries. And, far from being a source of strife, many couples find that working together to design and implement a cash-flow plan helps strengthen their unity and common purpose. Praying together about your household finances will help too.

Don’t expect overnight success

If you’re new to the process of using a cash-flow plan, be patient. It takes time to get in a rhythm of keeping track of your spending and figuring out the correct amounts to allocate for each category. Don’t get discouraged.

Persevere, and you’ll likely discover that a cash-flow plan isn’t the ball-and-chain you may have imagined. Instead, you’ll find it to be a tool that fosters a great sense of freedom in your finances.