The importance of having a budget is a “financial lesson” that cannot be lessened. If you and your family want to have financial security, having and following a budget is the answer.
What is a budget?
A budget is simply a spending plan that is based on how much you make and spend, over a period-of-time such as a month or year. A budget will help figure out short- and long-term goals and work toward them. You can’t go through life throwing your hard-earned money around on those items that catch your eye. Will you ever be able to save up for a down payment on a house or buy a car? You can spend money you do not have and owe it all to those credit cards. The average debt per household reached $5,525 in 2021 (“State of Credit in 2021: Rise in Scores Despite Pandemic Challenges”)
Not having a budget can lead to overspending
When we spend money without thinking carefully and realizing where it all goes will easily lead to overspending on a monthly basis. This will definitely limit the spending power in the future and more of your income will have to be applied to debt payments. If you are concerned or worried about restricting your spending, think how it would feel to have the majority of each paycheck applied to credit card payments. Stress levels would rise in finding ways to pay for your everyday needs which can be astronomical with most of your paycheck being spoken for.
Budgeting allows for you to focus on more important things
When budgeting, you can proceed to focus your money on the more important things, such as your goal to get out of debt, saving for that home, or starting a business. By having and following a budget you get to make the decision on how much to spend in each category that you have. For example, if you want to put a specific amount toward family leisure activities, don’t feel bad about it as long as you are saving and meeting the other needs. It is not about putting limits on the fun stuff in life, it is about taking those opportunities and having fun.
Budgeting gives you a sense of control over your money. You have the power to prioritize your spending, track how it is being done, and realize when the changes need to be made. A budget is the biggest tool you will have to change your financial future. You keep at it for a few months which are the most difficult and adjust your categories to find the ways that work for you by consistently checking and maintaining control and preventing overspending.
With the “age of plastic” people watched and knew whether or not they were living within their means. By the end of the month, if they had enough money left over to pay their bills and put away dollars in savings, they were on track. Today people who used their credit cards in excess don’t always realize they have overspent until they are deep in debt. But, if you’ve created and stuck to a budget, you’ll know exactly how much you earn, how much you can spend each month, and how much money you need to save.
A budget allows you to save money more easily
An emergency fund is just as important as a budget. Emergency funds are three to six months worth of living expenses put aside in case of an unexpected life event, such as home maintenance costs, loss of employment, or an illness. Do not try to put the majority of your paycheck into the emergency fund right away. Build it into the budget by setting realistic goals starting with small goals. Even putting $10 to $30 aside weekly, the emergency will build slowly.
A budget helps people in a stronger financial situation starting day to day into the long term.
Email Vickie at This email address is being protected from spambots. You need JavaScript enabled to view it. or call her at 717-790-2171 to get a policy started today.
