If you're like me, you work hard to earn a living. So it only makes sense to make sure you spend the money you bring home wisely. That’s where a household budget comes in. It’s a good tool to see at a glance what you have coming in, what’s going out (and what you're actually paying for or NOT PAYING FOR) and most importantly, if there’s anything left at the end of the month.
Before I dive into exactly what a budget can do for you, let’s consider for a minute, what happens if you're not tracking income and expenses. Let's say, you are spending $400 (or just $14 a day) more than you're making in a given month (or two, or three or 12). That can add up to over $5200 a year and can put you into some pretty hot water with credit cards and other debt. Most people also spend a lot more than they'd like to believe or admit on things like eating out, going to the convenience store, online shopping and even wasted groceries.
Having a budget gives us more control over where we want to really spend our hard earned money. Maybe that’s a fancy dinner and a movie, but maybe it isn’t. Maybe it's new shoes (my personal spending splurge) or a vacation (my other spending splurge), but maybe it's not. The point is - wouldn’t it just be nice to actually have a choice?
A Budget Tracks Where Your Money Is Really Going
A budget simply tracks your money, and is a financial roadmap. You record where the money comes from each month (your income) and then write out everything you spend it on, (YES I SAID EVERYTHING) starting with your regular monthly bills like mortgage or rent, car payments, utility bills etc. What’s left after all the actual household bills are paid is your discretionary income or spending money! For most people just this simple task will be a real eye opener! But here's the catch -you have to count everything, including what you're spending on your credit cards. Most people look at their spending and do not include what they charged on the credit card, which can cause a real snowball effect financially.
A Budget Identify's Things You Waste Money On
Having it all in front of you in black and white helps you identify things you’re wasting your money on, and sometimes allows you to see where you can spend or save for things that you really value - your lifestyle goals and dreams.
It makes you reconsider if you really want to spend that $14 a day on random stuff you probably don't need. Or how about that yearly subscription to something you no longer use? When you go through your expenses and reevaluate if this is REALLY how you want to spend your paycheck, it makes you think about what you are giving up by not tracking.
Budgeting Allows You To Be Proactive About Savings
Saving money without a budget is like dieting without willpower. We go in with the best of intentions at the beginning of the month, but then somehow with just one tiny bit at a time, there isn’t anything left. And then we find ourself frustrated, confused and even embarrassed that we are in the same place we started.
A budget gives you some willpower and a chance to be proactive rather than reactive. If you can set aside some money for savings at the beginning of the month, even if it’s just $150 a month - which is just $5 less spending a day. Put it in the budget as a regular expense, just like you do with your other urgent bills. If you need to, open a separate savings account so you’re not tempted to spend it or have it automatically invested in a Tax Free Savings account. If you could do that each month, just imagine what you could do with the that extra $1800 you would have each year. Yay, Vacation!
But most importantly, your budget will keep you on track and help you make sure you’re not spending more than you’re actually making - and that is truly the key to getting ahead.
It's time to think different and Plan Different - Good Luck Friends.
Cheapo Jo -who's still on a budget!
Jodie Stauffer, CFP is a wife, mother and Certified Financial Planner. "Being CHEAP has always been in my DNA. But let me tell you, juggling my business, household finances, financial goals with the needs or more accurately WANTS of my daughters, while staying on a budget has not always been smooth sailing." Cheap by Choice is about finding what's