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We all need a budget. I know that the word budget makes so many people cringe. For some reason, many don’t even want to think about having a budget. Maybe they don’t want to face the fact that they might have to give some things up to stay on budget. Or really don’t want to know that they aren’t able to live within their means. I get it, it can be scary.
But it is for these very reasons that everyone needs to have a budget. We all work hard to earn a living. We should make sure we spend the money we bring home wisely. That’s where having a budget comes in. It’s a good tool to see at a glance what we have coming in, what’s going out (and what that money is paying for) and if there’s anything left at the end of the month to put into savings.
Before we dive into exactly what a budget can do for us, let’s consider for a minute what will happen if we’re not tracking income and expenses. We may end up spending more than we’re making in a given month (or two, or three). Over time that can put us into hot water financially. We may also spend a lot more than we’d like to believe on things like eating out, going to the movies or new clothes.
Why You Need A Budget
Having a budget gives us more control over where we want to really spend our hard earned cash. Maybe that’s dinner and a movie, but maybe it isn’t. Wouldn’t it be nice to have an actual choice?
You Need a Budget to Track Where Your Money Is Going
A budget simply tracks your money. You record where the money comes from each month (your income) and then write out everything you spend it on, starting with your regular monthly bills like mortgage or rent, car payments, utility bills etc. What’s left after all the bills are paid is your discretionary income.
Your discretionary income (if there is any) can be spent however you choose. But when you see on paper that you are spending all your discretionary income on those very expensive Starbucks specialty coffees or wasting it on other things that only give you temporary satisfaction, you may change your tune.
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You Need a Budget to Help Identify Things You Waste Money On
Having it all in front of you in black and white helps you identify things you’re wasting your money on.
It makes you reconsider if you really want to spend well over $200 a month on Cable TV or $150 on your large cell phone plan. Or how about that yearly magazine subscription to something you no longer read? Go through your expenses and reevaluate if this is REALLY how you want to spend your paycheck.
Wouldn’t you rather use that money for long term financial health? Maybe that’s paying down the debt that is dragging you down month after month or saving for a down payment on your first home. Whatever it may be, wouldn’t it make more sense than wasting it on coffee or cable (or whatever else you are wasting money on)??
You Need a Budget to Allow You To Be Proactive About Saving
Saving money without a budget is hard. We go in with the best of intentions at the beginning of the month, but somehow there isn’t anything left at the end of the month.
A budget gives you a chance to be a bit more proactive. Set aside some money for savings at the beginning of the month, even if it’s just $20. Put it in the budget as a regular expense, just like you do with your other urgent bills. If you need to, open a separate saving account so you’re not tempted to spend it. I would even go as far as opening the account at a totally different bank that you do regular business with. This will make it a bit harder to dip into your savings for a few bucks here and there.
If you can, then have your savings taken straight out of your paycheck and directly deposited into the account. After a few weeks, you won’t even miss the money out of your paycheck.
You Need A Budget To Ensure You’re Not Spending More Than You’re Making
Most importantly, your budget will keep you on track and help you make sure you’re not spending more than you’re making. And I don’t have to tell you that that’s pretty important for your financial well being.
You need a budget to make sure you are living within your means and to prevent you from getting into debt or getting further into debt or to help you get out of debt.
You need a budget to help you identify wasteful spending and to help you stay on track and accomplish your financial goals in life, and the list goes on.
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