Do you have trouble sticking to a budget? Do you shy away from budgeting because you’re scared to assess your financial situation? Maybe you feel like you don’t have enough time or even money to budget.
According to a Gallup poll, only about 32% of Americans keep a written budget. The study concluded that people with an annual income of at least $75,000 are more likely to budget than those with a smaller income.
Another study conducted by Metlife found that 49% of Americans are concerned, anxious, or fearful about their current financial well-being.
We could look at financial statistics like this all day. Still, the reality of the situation is that a significant number of people are in trouble or concerned about their financial situation.
For this reason, today we are going to discuss budgets. We’re going to talk about precisely what they are and why everyone would benefit from using one.
Before we get started, I want to talk a little bit about why I budget.
My experience with budgeting
I have always tracked my expenses for as long as I can remember, but my official budget started in 2015 when I went through Financial Peace University.
My husband and I took this class as a part of our marriage counseling, and boy am I glad we did. Seven months into our marriage, my perfectly healthy husband found out that he had a brain condition and was unable to work for the two years that followed.
We unexpectedly went from two incomes to one with no time to prepare. Things got rough, but because we had a written budget, we adjusted seamlessly.
Had we not been on a written budget at the time, our financial situation today would look a bit different.
I know everyone’s journey doesn’t look like mine, but a budget can be helpful in every situation.
I am forever grateful for the suggestion for us to get our finances in order before we got married, and I promised myself that I would help others learn about budgeting and managing their money. So here we are!
What does it mean to budget?
By definition, the word budget means an estimate of income and expenditures for a set amount of time.
So basically, a budget is a plan for your money.
Budgets include all of your income, expenses, and savings. They are a way to make sure you have enough money each month. Without one, you may run out of cash before your next paycheck.
Budgeting is how you get a clear picture of your finances. It is also how to determine if you are on track with your financial goals.
Think about it like this. A budget shows you how much you make and how much you have available to spend.
Many people don’t budget their money because they feel like budgets are restrictive. They think budgets are limiting the amount of money they can spend when, in fact, a budget permits them to spend their money.
Budgets remove that guilty feeling when you purchase things because you have already planned for the purchases in advance and have the money to cover them.
Yes, budgets require discipline, but so do many other things in life. They are necessary and keep you on track with your finances at all times.
Why do budgets matter?
Budgets matter because you need a plan to accomplish your financial goals. It doesn’t matter if you are trying to get out of debt or save money, you need a budget.
Budgets make it easy to see the full picture of your finances at a glance. They also provide data that you can look back on year after year to ensure that you are improving your finances.
Just the other day, I looked back over the budgets for the past year and realized exactly how much money I spent on our gym memberships.
We have since decided to cancel the memberships and purchase the two machines that we use the most for our home. This purchase is going to save us so much money this year.
When you use a budget, you have a clear picture of your spending, and you’re able to make adjustments just like I did with the gym membership.
You won’t be caught off guard by expenses because you’ve already planned for them.
Budgets show you how much money you need to save for each of your expenses. You also have the opportunity to set money aside for miscellaneous things that will come up.
Things like oil changes and Christmas expenses are written into your budget and not treated as emergencies.
Using a written budget isn’t just a good practice for people that need to manage a lot of money or people that need to watch their spending. A budget is a good practice for everyone.
If you’re like most people, you have started and given up on budgets at some point in your life. The problem isn’t with the budget. The problem is habits and behaviors.
Most people give up when the budget doesn’t look like they want it to, or they think it’s too time-consuming to track their expenses.
Other people stop budgeting because it’s too hard to face the reality of their situation.
Let’s take a look at a few common budgeting myths and see if we can debunk them.
1. Budgets are restrictive
I think this might be the most common myth. Many people feel like a budget controls their life. In reality, you manage the budget.
When using a budget, you tell your money what it needs to do. Categorize everything down to the last penny.
Now, if you notice that you don’t seem to have enough money to cover the bills or do the fun things that you love, there is another thing going on.
You don’t have a budget problem. You have an income problem. If you do have an income problem, it’s time to makes some changes.
Think about getting a side hustle to increase your pay to a comfortable level while also working on a long-term solution to increasing your salary.
Long-term solutions include, but are not limited to, asking for a raise or securing a higher paying job.
Don’t be afraid to ask for a raise or look for employment that values your worth. Your job would replace you in a week if you left, so do what is best for yourself and your family.
2. It takes too much time
Budgeting takes up a lot of time in the beginning. The thing is, the more you budget, the faster you get.
Use a notebook or an app to document your expenses. This way, everything is fresh on your mind.
It will take you less than two minutes, and you don’t have to remember to do it later. Also, take a few minutes to go over your budget before bedtime.
Checking in on your budget will significantly reduce the amount of time it takes to reconcile your budget at the end of the month.
After a couple of months of budgeting, you should be able to complete everything in 15 minutes per day.
3. My pay is irregular
Irregular income is a common myth. A lot of people think they can’t keep a written budget because their income is irregular.
The thing is, these are the people that would benefit from a budget the most!
Irregular income or being paid different amounts at different times is more common than you think. It may feel overwhelming to budget this type of pay in the beginning, but it gets easier.
You have to shift your mindset to think about what you need your money to do until the next paycheck. Start with the most important bills first.
The essential bills include food, shelter, clothing, and transportation.
Budget all of the money from your current paycheck as far as it will go, and any remaining bills, expenses or savings will need to be paid with the next paycheck.
When you think it that way, it’s not as overwhelming, and it will allow you to see the big picture each time you get paid.
4. Unexpected expenses keep coming up
You will always have unexpected expenses, whether you pay attention to your finances or not. Budgeting allows you to prepare for the unexpected by setting aside money every time you get paid.
Start with an emergency fund of $1,000. Save this money as quickly as possible (sell a few things if you need to) and keep it in a savings account. This emergency fund will provide a bit of cushion in your budget.
When something unexpected comes up, and you don’t have money to cover it in your budget, use your emergency fund to cover the expense.
As soon as you spend any money from your emergency fund, save the money to replenish it as quickly as you can. The method prepares you for the unexpected.
5. I’m not good at math
A lot of people use this excuse. I’m not the best at math, either. These days, you don’t have to be good at math to keep up with your budget.
Take a look at those apps and get started budgeting right away. Don’t let something as simple as numbers keep you from reaching your goals.
6. I keep up with everything in my head
I think it’s incredible that some people can keep up with totals and calculations in their heads.
The thing is, budgeting isn’t about remembering totals. It’s about seeing your progress and making those numbers real.
Using a written budget takes away all of the guesswork with your finances. Your budget also allows you to focus on your progress and making habit changes each month to reach your goals.
Why do you need a budget?
The answer to this question is simple. You need a budget because budgets help you come up with a solid financial plan.
Budgets help you reach your financial goals as well as give you peace of mind.
Many people think they are tedious and unnecessary, but it’s the opposite. The more you budget, the easier it becomes.
You will start to find yourself more prepared for large purchases. You will also become more conscious of the ways that you are spending your money.
Missed payments and late charges will be a thing of the past.
The need for a plan for your money is even more apparent now than it was ten years ago. The reason is that you can shop for anything without leaving your home.
It is way too easy to get off track and overspend with little to no thought. A glance at your budget before making purchases will keep you on track with your spending and savings goals.
View your budget as your roadmap, not a restriction.
The Bottom Line
A lot of people struggle to wrap their heads around budgeting, but it is essential on your journey to take control of your money.
They give you a clear picture of your finances and help you figure out what your money needs to do before you get paid again.
Don’t believe the myths about budgeting before you have tried to use one yourself. Take it slow and give yourself some grace. You will get better at it every month.
Do you currently use a budget? If not, what roadblocks have you run into when attempting to budget?