By Sarah Stewart Legal Group, PLLC
Do you have a budget? If so, you are in the minority. A study from the U.S. Bank in 2017 found that only 41% of people living in the U.S. had a budget.
Experts agree making and following a budget is the best way to manage your money and save for emergencies, vacations, and retirement. Budgeting also relieves a lot of stress by allowing people to plan for expenses and be sure they have enough money to live each month.
If you aren’t budgeting, we’ll tell you why you should and how to do it right.
(1) You Have Control of Your Money
With a budget you know how much money comes in and where it goes. You know what you can afford each month and can make a plan to lower debt and plan for other life and financial goals.
(2) Emergency Planning
When you have a budget and know where your money comes from and where it goes, you can plan to put some extra aside for emergencies. Have you ever had your air conditioning go out in the heat of the Summer? Have you had a pipe break, flooding your house? Wouldn’t it be nice to have the money set aside to cover those expenses without affecting your month?
(3) Determine and Focus on Money Goals
Knowing where your money goes gives you the power to change spending habits and decide what money goals you have. Have you always wanted to take a trip to Italy? What would it take to get there? Planning for that trip will motivate you to skip the coffee drive through a few times a week.
(4) Share with Your Spouse and Family
Budgeting allows you to work as a team with your family and teaches your children how to use their money wisely.
(5) Foresee Problems
With a budget, you learn the ebbs and flows of your finances and can head off possible financial problems before they become problems.
(6) Decide About Debt
Budgeting helps you decide what, if any, debt you can afford. Do you want a new car? Can you really afford it?
(7) Adjust Spending
When you budget, you can get rid of unnecessary expenses and add the savings up for retirement, college funds, vacations, or whatever you want.
(1) If you’re married, be sure to budget together. It won’t do any good if the two of you aren’t on the same page about important expenses.
(2) Be flexible. Every month can be different. You may need to buy school supplies, car maintenance expenses, or holidays. Be sure to allow room for these expenses in your budget.
(3) Start with food, shelter, utilities, clothing, and transportation. Your necessities are the most important. Fill everything else in around them.
(4) Pay off debt. The less money you owe, the more you have for yourself! Not to mention, credit cards and loans charge interest and penalties, taking more of your hard-earned money than you can imagine.
(5) If you’re struggling with certain expenses in your budget, such as entertainment, pull out cash for the month for that category. Only use the cash. Once it’s gone, you can’t spend any more on that category.
If you don’t have a budget yet, sit down with your family and set one up today!