Why do you need a budget?
There are so many people who make new years resolutions to save more money, spend less money, or pay off debt. Maybe you think that you don’t really need to make a budget because you can just keep track of everything in your head.
I used to think that. I used to keep a mental note of how much money was in my checking account so I could always pay my bills, or go out with friends and not overspend.
The thing is though, I still found a way to overspend. I also had this feeling that I never had enough money. Sometimes I lost track of how much money I had and overdrew my account.
Every month, I watched my checking account slowly dwindle with no real plan to boost it up to a comfortable level. I also never put any money into my savings account.
Sometimes I dreaded upcoming bills because I wasn’t sure if I’d have enough money to cover them.
Can you relate to any of this?
A 2017 survey by CareerBuilder states that 8/10 Americans are living paycheck to paycheck. That’s huge! 80% of full time workers scrape by and truly struggle to make ends meet.
Now add the fact that only 41% of Americans use a budget to track their spending, and it’s easier to see why so many people have financial struggles.
Do You Have a Budget?
Take a couple minutes to reflect on these statements. How many are true for you?
- You’re not saving any money.
- You have no retirement savings, or very little.
- You have no idea how much money you spend each month.
- You’re constantly short on money.
- You have credit card debt and are constantly overspending.
If any of those statements ring true, you need to create a budget today. If you make a budget and stick to it, it will turn these statements around. You will save money for emergencies and retirement. You will know exactly how much you spend each month, and you’ll have a means to get out of debt.
A budget is the lifeboat your finances need to save it from drowning.
Why is There So Much Bad Stigma About Budgeting?
For some reason, a lot of people have negative mental associations with budgeting. Like it’s a punishment for not doing a good enough job with money. Nothing could be further from the truth.
The biggest misconception I’ve heard is that budgets are restrictive and inflexible. Again, I’ve found that to be untrue.
A budget is a tool to take control of your money, and not let it control you. You get to create your own priorities and plan to spend money for what you think is important. If it’s not a priority, don’t spend money on it.
Of course if you’re barely making ends meet, a budget might feel really restrictive. But then again, isn’t it restrictive and nerve racking to spend money and pray you have enough to get by?
Creating a budget puts that control back in your hands. It also does wonders for improving your finances.
So What Does a Budget Do?
1. Most Effective Way to Track Your Spending and Stick to Your Priorities
Very few people I know personally use a budget to track their spending. I was one of those people until about 5 years ago. Since creating a budget, my life has been completely transformed!
If you have no idea how much you spend each month, you need a budget. It’s honestly one of the best tools to manage your money and actually SAVE money. Before I started budgeting, I put zero dollars into savings. Absolutely nothing. Then even if I did, I often took it back out because I was short on money.
Because of my budget, I know exactly how much money I make, spend, and save each month. I might not know it off the top of my head, but it takes all of 10 seconds to look it up on my budget spreadsheet.
2. Gives you More Freedom in Your Finances
This might seem counter intuitive, but it’s not. Using a budget is one of the most freeing things I’ve ever done for my finances. When I first started budgeting, I didn’t have this view. In fact I thought my budget was really restricting. But it’s gotten better the longer I’ve done it.
There were many ugly moments in the first year of following a budget. We cried a lot and were frustrated a lot. We did feel restricted and stuck, like we weren’t free to spend any money. Our big financial goals of being debt free didn’t allow us to spend extra money on fun stuff.
The truth is, we weren’t making very much money and we had A LOT of debt. We paid over $900 towards our debt every month with MINIMUM payments. Since we wanted to get out of debt in less than 5 years, our budget got even tighter. If you have a lot of debt, just know that very few budgets are going to feel freeing. At least at first.
But then something really strange happened. Our debt started to go away and budgeting got really fun. Yes it took time, but in our second year, the wheels really started rolling. It became a sort of game to see how much debt we could pay off each month. We dissected our budget to see if we could cut any unnecessary spending, like cable or random shopping.
We finally gained control over our money and told it what to do and we dictated our priorities and spent money on what we thought was important. It was one of the most freeing feelings I’ve ever experienced.
Today we are debt free after paying off $73,ooo in a smidge less than four years. When we started, that seemed impossible. But with consistent effort and increasing our income, we chose to prioritize getting out of debt and our budget has never felt more free.
3. Pay Off Debt Faster Than You Ever Thought Possible
If we never created a budget, it would’ve taken us 25 years to pay off our student loans. Our budget helped us see the full reality of our spending, and our expenses. I immediately noticed that I was spending more money than I made each month and knew something needed to change.
I sat down through a lot of tears with Jenna and we analyzed which expenses I could do without. We worked together to set limits for spending on food, gas, going out to eat, and changed a lot of priorities around. I also noticed just how much debt I had and how debilitating it was to the lifestyle I wanted to live. It had to go.
Our story is pretty crazy, paying off $73,000 of debt in less than four years. When we started, that seemed impossible. Our initial goal was 5 years, and I laughed out loud when Jenna first suggested it. I really did.
If you feel desperately trapped by debt, make a goal to pay it off. Then put a time frame on it and WRITE IT DOWN! Any goal that you write down has a higher chance of happening. Your budget will be your north star guiding you to debt freedom.
4. Puts You in Control of Your Money
If you don’t make a plan for your money, you’re leaving yourself open to let your money control you. I’ve lived a lot of my adult life running after money, working hard to make ends meet, and struggling to pay all of my bills. But that’s because I didn’t have a plan.
Creating a budget gives you a plan for your money. Before the month even starts, plan out exactly how you’ll spend every dollar. Also factor in how much money you’ll make for the month. Then stick to your plan. If it’s not in the budget, spending extra money going out to eat will detour you from your plan, and ultimately your goals.
When you decide to take control of your money with a budget, you no longer let your emotions dictate your spending. Your spending becomes proactive instead of reactive. Then you can confidently move toward your goals.
5. A Budget Helps You Reach Your Financial Goals
If you don’t know what your financial goals are, now is a good time to sit down and start brainstorming.
Are you trying to get out of debt? Save money to buy a house? Go on your dream vacation? Adopt a child? Save for a comfortable retirement?
What are your goals?
Once you create motivating financial goals, your budget becomes your road map to reach your destination. It holds you accountable and keeps you on track. Your budget becomes your best friend that cheers you on from the sidelines. Sticking to your budget moves you closer to your goals, and breaking your budget turns becomes your greatest obstacle.
Are You Ready to Start Your Budget and Change Your Financial Future?
I want every family to get out of debt and reach their financial dreams. That’s why I stay up late and get up early to work on this blog. It all starts with a budget.
If you don’t have one, I’m sharing my family’s budget spreadsheet and debt log that helped us pay off $73,000 in less than four years.