According to the findings of a Gallup poll, less than a third of Americans bother to create a formal budget every month. The same study revealed that less than half of Americans have more than $1,000 saved away and another study by CareerBuilder confirms that a whopping 78% of families, spread all across the income spectrum, live from one paycheck to another. Most financial experts would say that this sorry state of things is a natural outcome of not budgeting. Even though unexpected events like a job loss, a medical emergency, a natural disaster, death or divorce in the family, etc. can rock the boat hard, in general, budgeting is a very effective way for most people to take charge of their finances. However, despite the many obvious benefits of making budgets, most people fail to actually make and implement them. For those who are still blissfully ignorant about the money problems that budgets can cure, a round-up:
You Are Clueless About Where Your Earnings Are Going
Most people tend to go crazy figuring out where their money goes every month after their bank accounts run dry well before payday. Perhaps the singlebiggest advantage of making a budget is that now you can actually figure out how you are spending your money each month. While you can have many types of budgets, each one of them requires your expenses to be tracked in important categories like rent and mortgage payments, groceries, clothes, school or college fees, utilities, loan repayments, entertainment, dining out, etc. If you don’t have a budget and have a habit of paying off bills arbitrarily or splurging on something quite unnecessary without bothering to find out if you have adequate money left over after paying off the mandatory bills, it is quite likely that you will always be living on the edge.
By itself, the budget cannot stop you from overspending or spending recklessly, however, what it can do is to make the situation very clear. If you heed your budget, not only can you plan your spending properly but also you can stay on track each and every day of the month.
You Have Difficulty in Keeping Track of Bills
If you had been thinking that budgets were good only for bringing your expenses under control, you will be delighted to learn that a side effect is that budgeting can bring about a lot of discipline and organization into your life. While earlier, you might have paid your bills as they arrived or even randomly and even been missing out paying a few because of lack of monitoring, with the setting up of a budget, you will automatically be tracking all your expenses. Therefore, you will know which bills have arrived, which are yet to come, which are due, and which ones you have paid off. Zero-sum budgeting expects you to tick off each bill as it is paid so that you automatically know which ones are pending payment at any given point in time. Even after making a budget you find tracking multiple debts cumbersome, it can be useful to consider a debt consolidation loan, however, you need to choose wisely to get the best deal; going over the ratings of debt consolidation companies can be a good idea.
You Are Habitually Overspending
Since with the help of a budget you can track where exactly your money is going, you will very easily be able to discover the areas in which your money is being consumed more than what it should have been. For example, if you are a booklover, you could be habitually picking up books not realizing how much you are devoting to your passion or you could be eating out with friends very often and not appreciating how much damage it is causing to your wallet. However, when you allocate specific amounts of money in your budget to specific heads, you will soon realize if you have crossed your self-imposed limits on any activity and that you need to immediately put a stop to it.
Tracking your expenses is perhaps the most effective way of appreciating how much cumulative damage even innocuous activities may be doing when repeated too often. Putting an end to irresponsible spending can save you hundreds of dollars that you can put to other good uses or deposit into your savings account. Use SaveYou, a new coupon site to try to find ways to save in your monthly spending. Using the right coupons can save you hundreds of dollars each month. Typically, most people have reported the biggest benefits of tracking expenses in activities like dining out and entertainment. It is quite common to assume that your expenses are under control but monitoring it may tell you a tale that is quite different.
There Are No Savings despite Earning Handsomely
According to forbes.com, “40% of Americans can’t pay a $400 emergency expense.” Nothing could be more disastrous if after slogging it out at the workplace, you have to live from one paycheck to the next. If you thought you were alone, it will shock you to learn that averagely Americans have less money than they actually owe. Since it cannot be comforting to know that there are many others in the same dire straits as you, it is high time you started to make budgets. Among the biggest advantage of budgeting is that you are forced to save money as you reduce your wastage. If you take up zero-sum budgeting, you will discover that the system even asks you to allocate money to your savings just as if it were an expense head like groceries. With a budget in place that you can stick to, you will soon find out that you are spending less than before and when there is less money being wasted, you will start accumulating savings and with some focus be able to reach your savings target faster.
It is never too late to start budgeting. You simply have to appreciate that to make it a success; you need to perhaps change your attitude. Instead of treating it as restrictive and as a tool intended to deny you of the pleasure of life, think it as an enabler that can help you to get your spending under control so that you can achieve your financial goals.
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including money saving, Budgeting, business debt consolidation, business and start-ups.