How to Create a Budget That Will Keep You From Going Broke Figure out where you want to be financially and how close you are to reaching that goal.

The question of how to budget for short-term purchases without breaking the bank is extremely timely given a recent survey released by the Federal Reserve that as many as 44 percent of Americans couldn't cover an unexpected $400 expense. And, according to GoBankingRates.com, 62 percent of Americans have less than $1,000 in savings.

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One of the most critical and first steps to creation of wealth and thus not "going broke" is to create a wealth vision for yourself and/or your family. As discussed in my new book, Wealth Can't Wait, a wealth vision is creating a global goal or vision of where you want to be financially (income, expenses, savings and investments) over different periods of time in your life. (My near term goal may simply be to reduce credit card debt from $15,000 to $10,000 before the end of the year). Then, create awareness of where you are in that financial journey -- ahead of schedule, on target or behind schedule -- to create awareness that will help you to budget and make great short-term spending decisions.

For example, deciding to make a fun purchase now is a short-term decision -- shall I have dessert or not? It's much easier to make an informed decision based on knowing where you are in the bigger picture. Right now, I am in the process of losing 16 pounds in four months (4 pounds per month). My goal is to exercise four times per week. At the end of the third week, I had lost four pounds and had kept to my exercise goals. So, it's easy and simple for me to say yes to dessert. If I were behind a little, I would say no. I could use a complex calorie counting program, which can be a helpful addition. But, nothing informs my short-term decision like having a health vision and knowing where I am on that journey.

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Similarly, budgeting for a fun purchase, knowing where you are in your journey makes it an easy decision. For example, I wanted to buy a new bike before a little trip I was making at the end of the summer. Not being an avid cyclist -- to say the least -- research showed me that a $500 purchase would put me in a good place. But, the super cool, carbon fiber version was $2,500. I would really love that one, and have it rationalized to where I believe that if I buy the cool one, I will ride more, fitness will become more fun, etc.

I used two different tools make this decision. The first is, where am I in my wealth vision? Right now, I was in a position to make this purchase without jeopardizing my goals. I was ahead of my summer investing goals. That said, cash flow had been tight because I was also doing some minor renovations. The additional $2,000 would not massively disrupt my wealth vision plan, and I could cut back somewhere else. So, I could comfortably make this purchase. So, then, I move on.

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The second part of my analysis was asking myself a critical question. What will the additional purchase do for me? What do I get out of it? Here is my answer: I have always wanted a super cool bike even though I don't bike often. It would be fun to ride it on this trip and I know I would feel great about it. So, that's all good. But, I assumed while looking at the $500 bike that I would buy it and not use it again for another year, like my previous bike purchases. How would I feel if I bought the cooler bike and rarely, if ever, used it? I know it would not be a feel good for me.

My final decision -- I bought the more expensive bike and made a few budgetary adjustments to soften the impact the additional cost had on my financial goals. And, so that I don't buy something that makes me feel great in the near-term (riding my new carbon fiber bike with my buddies), I made a relatively easy commitment to schedule a ride with my buddies once a quarter at a minimum. With this done, I bought without worry or remorse.

I avoid buying anything that will make me feel bad later. To assure this happens for you, use our two tools: Where are you in your wealth vision (and how does the purchase affect your journey) and how much value (intrinsically) will I get from the purchase? Or, how can I create the purchase so it serves me and makes me feel great?

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