Budgeting is not an easy topic but one that many deal with or face. Why do we fear budgeting? For some, it’s a matter of sacrifice and learning to live with less. This prospect may scare us. For others, it may be coming to terms with our financial reality. For example, when we carry a lot of debt and we’re already living paycheck to paycheck; the thought of fully facing our personal finances is a stressful situation. However, living within a budget does not have to be a scary situation. In fact, a budget can be financially freeing once you get used to it. And I would even argue that if you’re in any sort of debt, you need a budget. Let’s talk about the how and the why.
Why You Need a Budget for Debt Relief
I’ve already shared tips and advice for creating a budget specifically for getting out of debt. And I’ve also shared 8 tips for creating a family budget. But I haven’t really talked about why you need a budget.
And I’ll be completely honest with you: budgeting was not always my favorite thing.
I was one of those individuals who shuddered at the very idea of budgeting and living within a budget.
I thought I was perfectly capable of managing my finances and making ends meet.
I’ll also be completely honest and let you know that I was wrong about my assumptions. I ended up relying on support from my mom more times than I would have liked. In fact, had it not been for my mother, I may have ended up without a home.
That’s when I realized that budgeting was a fear that I had to conquer, whether I wanted to or not.
But before I did that, I had to get out of that mindset. I had to get over the negativity that I had associated with budgeting. Otherwise I would never get very far with creating a realistic budget. I also had to realize that having a budget would be a necessary tool going forward if I wanted to have any sort of control over my personal finances and my existing debt.
If you don’t want to be controlled by your money, you must take control of it and make your money work for you by using a budget.
Most people have no idea if they are living within their financial means or not, until they find themselves so far in debt that they can’t get out. If you have goals or dreams for your future, most will require a certain amount of money- without a budget, you are likely to never achieve those goals and dreams. Also, and probably among one of the most important reasons to budget is that it allows you to prepare for emergencies and the unexpected. Without a budget, these unexpected expenses can be detrimental to your finances, and even change your life.
For some people, “budget” is a “bad word”.
If the term makes you shiver in fear, it’s possible that you have attempted a budget in the past that didn’t work for you. It’s also likely that you think of a budget as a lock and key over your wallet; but if you begin to understand that budgets are the road to financial success, you are likely to have a much easier time reaching your goals with a budget.
How Do You Spend Your Money?
Without a budget, it’s not possible to keep track of all of your spending. Many people think they know exactly where their money goes on a regular basis, but without a budget- I guarantee you will be surprised if you do a monthly tracking challenge.
On a piece of paper, or in a small notebook that you can carry around with you, write down every cent you spend for a period of one month.
Write down every single coffee you buy at the local coffee shop, the candy bar and newspaper you picked up at the market, and absolutely everything you spend your money on for a period of a month. Add it up. I guarantee you had no idea you were spending that much money on the little “incidentals”.
Three Budgeting Techniques that Lead to Financial Success
A large part of budgeting involves personal finance planning. All three of the following activities are important when creating a budget that you can live comfortably with, as well as one that helps you prepare for the long term.
Controlling Daily Spending: While it’s true that most people spend money on things that are not necessary, it’s important to allow yourself some money for this type of spending. Things that give you enjoyment are important, but you need to have a control over this type of day-to-day spending so that it doesn’t get out of control.
Creating Financial Safety: An often overlooked aspect of a personal budget, everyone should prepare for the unexpected. There needs to be access to money for things like a car breaking down unexpectedly, an illness or accident that puts you out of work for awhile, or a natural disaster.
Preparing for Financial Goals: Everyone has some financial goals. Whether you want to buy a house, send your kids to college without going broke, or retire at a young age- these are all activities that require financial preparation and budgeting.
Having a budget is a discipline approach to reaching your financial goals, having money for entertainment and for your quality of life, and being able to afford the items and expenses you have to pay.
If you are mismanaging your money or spending your money on wants instead of needs that is a little harder to overcome because this takes willpower and discipline.
It takes 23 days to develop a habit so you have to practice good spending habits everyday.
Each week it will get easier and easier. It also helps to develop financial goals for yourself, such as you want to get out of debt within a specific time period, you want to buy a house, take a vacation, whatever your goals are write them down and give yourself a target date.
Don’t get alarmed if you miss your target date for a financial goal because your main focus is changing your spending habits. Remind yourself that you are working toward achieving your goals. It may take some time, but I know you can do it.
Being debt-free is worth the hard work and discipline required.
Financial freedom is so sweet. Just think how nice it would be to wake up each morning: not worrying about having to pay a creditor, not worrying about creditors calling your house asking for a payment, being able to see yourself in a house or buying investment property or taking a vacation every year.
My challenge to you: for the next 30 days (and yes I realize- we’re getting into Christmas crunch time), track your every day spending. This includes little things like morning coffee, snacks at work, etc. Track everything. We’ll talk about what to do with this list at the end of the month.
Do you think you need a budget? Why or why not?