Although budgets are the foundation to financial prosperity, many budgets fail.  Three main reasons that budgets fail include unreasonable expectations, lack of discipline and poor follow through. 

Budgets often fail because they do not reflect financial reality.  The savings plan may be ambitiously unrealistic, or fixed payments are considered variable.  A successful budget will not only be realistic, but will fit within your lifestyle.  The more realistic a budget is, the higher the probability of success is. Be real and set solid goals, not unattainable ones.  

The second reason that budgets fail is because they cannot carry from one month to the next.  While the budget works great for January, it does not account for the insurance premium due in February or your property taxes due in April.  Therefore, by creating a specific monthly budget, you can accurately gauge your anticipated expenses – this will help you to develop the most realistic budget possible. 

Another reason budgets sometimes fail is because the plan does not accurately track remaining surplus money.  You may diligently keep track of each dollar spent, but how will you account for the extra money at the end of the month?  It is important that you have an investment plan that is in line with your budget and remaining monthly income.  Extra money must be put aside or your budget merely redirects money and you never get ahead.

Prioritize your budget

Once you have taken the steps to decrease the potential failures of your budget, it is then important to assign budgetary priorities.  This will be the next step to having your budget work towards your financial prosperity. 

First, place all of your necessary expenses at the top of your budget list, such as your mortgage, car payment, health insurance, utilities, and groceries. Necessary expenses are the bills you must pay monthly or quarterly. 

The next part, which is critical to having your budget work for you, is prioritizing your optional expenses, such as shopping, dining out, and entertainment.  By prioritizing your optional expenses, you can usually maintain your adjusted lifestyle, while still providing savings.  Evaluate each optional expenses based upon how much utility it provides you.  You can then find ways to cut out optional expenditures that are not as valuable to you, thus giving you money for your priorities and savings. Be realistic but remember that your goal is to save money to invest.

Determining realistic savings in your budget     

A general rule of thumb is to save 10% of your income to place into your savings account, investments, 401K, or Roth IRA.  10% of your income can be a good start when you are attempting to determine how much you should save each month.  It is small enough to not significantly change your lifestyle, but large enough to becomes significant wealth over a period of time.  However, for some people 10% is still too much as they are already spending a large amount of their income on necessities.

No matter what amount you save, the important thing is to begin a savings program and develop the discipline to stay on it. You will find that the most important aspect of a budget is that it makes you aware of your financial limitations and possibilities.