An image of a woman reviewing her financial papers and receipts is used to illustrate the concept of sticking to a budget.

Do you know how to stick to a budget? It’s the first step to financial freedom. With the fast pace of life and the many demands on our time, it’s easy to be in denial about finances. A simple and time-tested antidote to this common experience is to develop and work with a budget.

Budgets can help prevent a lot of financial stress and build a solid financial future. Plus, a budget gives you a realistic picture of what you need to earn to cover your expenses.

What is a budget? A budget is a written plan to help you coordinate your resources and expenses. It lists your expected income and expected costs over a given period of time. For example, you might create a monthly budget, a quarterly budget or an annual budget.

Type of Budgets

The two major types of budgets are personal and business. Your personal budget is what you would create regardless of your source of income. Note that even if you don’t need to create a business budget because you work as an employee, review the list of typical business expenses included in this article because you may need to include some of them in your personal budget if they aren’t paid by your employer.

The following are typical items included in personal and business budgets. (Your individual situation may include only some of these items, or it may include all of these and more.) It’s best to include as many categories as possible, so your forecasting is more accurate. (Emergencies can be devastating to any budget.

While I don’t recommend planning for them, it’s wise to set aside a specific amount of money in reserve in case something occurs. Then, if you don’t have any emergencies at the end of the year, that money can stay in that fund or go to pay for something else, as long as you allocate a certain percentage of the next year’s income to an emergency fund.)

Be thorough in estimating the monthly costs for each. If it’s an expense you only have once per year, divide that amount by 12 to get your estimated monthly expenses.

• Income for a personal budget includes salary from employment, payments from your business, savings and such other sources as a 401K

Personal-budget expenses might include rent, mortgage, insurance; home repair and maintenance, furniture, decorations and utilities; phone; food and toiletries; such entertainment as movies, concerts, TV and cable, books and music; travel, including airfare and accommodations; child care and pet care; gifts and donations; transportation or car payment, insurance, gas, repair and maintenance; health insurance, co-pays, prescriptions, and such personal care as hairstyling and clothing; and emergency funds, savings and investments. (A certain percentage of these expenses might appear on your business budget.)

• Income for a business budget comes from services; retail sales; presentations, classes and consultations.

• Business-budget expenses might include rent, mortgage, insurance, owned-building repair and maintenance, furniture, decorations and fixtures; phone; transportation or car payment, insurance, gas, repair and maintenance when one’s car is used for business; such equipment and supplies as linens, lubricants, tables and laundry expenses; office supplies and retail inventory; marketing materials; such professional fees as legal, accounting and business coaching; insurance; such entertainment as meals with business associates; travel, including airfare and accommodations; association dues; licenses and permits; continuing education; and emergency funds, savings and investments. (A certain percentage of these expenses may appear on your personal budget.)

“What Am I Really Spending?”

Notice that some things on these lists end up as fixed amounts, such as the same rent payment each month and the annual cost of insurance—but many are variable. Utilities can vary greatly from month to month, for example, depending upon the weather.

Discretionary items, like entertainment, can go up and down in cost as well. Variable and discretionary expenses become the trickiest and easiest way to blow your budget, so it’s wise to err on the side of caution and overestimate those expenses.

Additional personal budget items that are difficult to project accurately include food and entertainment. It’s easy to forget to include small expenses such as items from vending machines, drive-through and convenience-store visits. Yet, that $1 here and $3 there can add up. With a personal budget, you might not be aware of every place or instance you will spend your money.

Business budgets are more straightforward—unless you overlook potential expenses, don’t properly estimate the cost of expenses, or don’t earn projected income.

Here’s an activity to help you discover what you’re spending: Keep track of everything you spend your money on for one month, whether it’s a fixed monthly expense, such as rent, or a variable expense like dining out. If you buy a dress, a massage chair, a pack of gum—record it. Save every receipt and keep a log of expenses for those purchases without receipts.

Be as honest and thorough as possible to get the best overall picture of your spending patterns. This information helps you determine what items to include in your budget and your projected costs.

How to Stick to a Budget

Creating a budget and sticking to a budget sounds simple. Unfortunately, it isn’t always easy to do. The main hurdle is the majority of massage practitioners can’t reliably guarantee the amount of money they earn. Another potential obstacle is out-of-control spending habits.

Here are some suggestions:

1. Create an annual personal and business budget, and divide it into months. You might want to add line items to the monthly budget to set aside money for big-ticket items and annual expenses.

For instance, you are creating an annual budget and you decide you want to take a $500 training course in June, and the registration needs to be paid in May. Under the monthly “Education” category you might have two lines: one line for regular, monthly education expenses, such as $20 to cover books, magazines and local classes.

The second line will be titled “Education Savings,” where you will allocate $125 each month for January, February, March and April to cover the registration payment you will make in May.

2. Keep a receipt envelope where you stash every receipt. This will help you keep on top of recording your outflow. You won’t have any reason (excuse) to not know how much you’ve spent, where and when.

3. At least once a week, record actual income and expenses, including all of your incidental cash purchases.

4. At least once a month, compare your actual spending to your budget/s and make any necessary adjustments, such as moving an expense to a different month or changing the amounts budgeted to specific categories.

If necessary, consider ways of increasing your income so that you can stay in your budget. I have found in my coaching practice working with clients in a variety of businesses, this step often meets with the most resistance. Be kind to yourself, but be diligent.

Budgeting Resources

Many banks offer free online budgeting tools. Other companies offer bookkeeping software and budgeting apps that can automatically generate budget projections to actual reports, as long as you’ve entered all the required information.

Here are some examples:

Mint is a free budgeting app (owned by Intuit) that helps you track categorized transactions, compares your transactions to your budget, and even sends you an alert when you go over your budget.

YNAB  offers an interesting approach to budgeting in that you base your budget on your income, allocating each dollar to a specific category—forcing you to think about every dollar you spend. It has mobile and desktop interfaces, along with options to sync to your bank accounts to automatically enter expenses; you can also manually enter them.

PocketGuard connects to your bank accounts, tracks individual bills, looks out for recurring bills, and even suggests alternative companies to save you money on certain monthly service costs.

QuickBooks  offers a suite of business software that includes a mobile app. The prices vary depending on the features you want. All provide income and expense tracking reports for budgeting.

“What If I Start to Blow My Budget?”

Most therapists think their budget gets blown because they didn’t earn enough money. What’s more common is they overspend, forget to include certain expenses in their budget, don’t accurately project costs, or don’t set aside savings to cover big expenses.

You are less likely to lose control of your budget if you review it regularly. Even so, unexpected things can occur.

Remember my note about your emergency fund? Unexpected events are why it’s wise to have an emergency fund. Most financial planners recommend at least three months of living expenses—and at least six months of operating expenses if you have a business.

Remember, a blown budget is not the end of the world. It’s a temporary setback as long as you take action to correct it. The first step to getting back on track is to identify the problem. Did you simply spend too much? Did items cost more than anticipated? Did you have unexpected expenses? Did you earn less than expected? 

Once you’ve identified the problem, the second step is to review your budget to see what adjustments you can make. Perhaps there are expenses you can reduce or eliminate. You might need to change some of your goals or assign them to a later target date. And, of course, examine additional ways to increase your income.

The third step is to analyze your spending patterns. Do you tend to impulse shop? If so, then perhaps budget a maximum amount of money each month, or year, you allow yourself to spend on impulse or discretionary items. (Another tip for reducing impulse spending is to make it harder to do: Unsubscribe from emails to your favorite stores and restaurants, and wait at least 24 hours before purchasing any item that is not in your budget.)

The fourth step is to reflect on what you do when your income exceeds your projections for a given time period.

For instance, it’s common for people to spend “extra cash” when they experience an unexpected windfall, such as having a higher-than-usual amount of clients, selling an unexpected number of gift certificates, or selling a lot of retail products.

Do you tend to do this? You can avoid this pitfall by checking your budget before spending that extra income, as you might have a large one-time expense coming up soon. Another useful strategy when your actual income exceeds your projections is to put at least half of the extra money into a savings account.

Ultimately, budgeting gives you control over your money. It keeps you focused on your financial goals, helps you stay organized, guides you to make better decisions—and ultimately saves you money. 

Cherie Sohnen-Moe

About the Author

Cherie Sohnen-Moe is an author, business coach, international workshop leader and successful business owner since 1978. She has served as a faculty member at a massage school, acupuncture college and holistic health college. Sohnen-Moe is the author of Business Mastery and Present Yourself Powerfully, and co-author of The Ethics of Touch. She is a founding member of and is the past president of the Alliance for Massage Therapy Education.