Not having a budget is almost certainly hurting your long term financial plans. People without budgets tend to spend more haphazardly, wasting money on impulse purchases and unable to save up for things they really want or need. What’s more, without a budget you’re far more likely to end up in a position where you don’t have the money to take care of a big expense, like a car repair.
So why don’t people have budgets? Why don’t YOU have a budget? Most people tell themselves they don’t need one, or that they can track their income and expenses in their head. Maybe you find logging your expenses in a checkbook or ledger frustrating or annoying. There are as many excuses as there are poorly handled bank accounts! The good news is that the first step to solving your financial problems is taking a hard look at why you don’t have a budget, understanding your reason is faulty, and then creating a budget you can stick with.
We’ve put together the 5 biggest offenders when it comes to reasons why people don’t create or stick to a budget, and how to fix them. Take a look and see if you find yourself in any of these, and then use this information to fix your finances once and for all!
Budgeting Myths and Lies
You think a budget is restrictive
“I want to be able to spontaneously go out for drinks or on a date!” This is reasonable and a budget doesn’t stop you from doing spontaneous things at all! You can approach spontaneous expenditure from a few different angles. On one hand, you can budget in a little extra spending money and then assign it a purpose once you’ve used it – say for a babysitter and a movie. Likewise, you could add a spontaneous night out into the budget and move things around to accommodate it (just don’t do this often!)
The main thing is to put it in the budget! Even if you find that eating out on Friday means you’re eating bologna sandwiches next week for lunch, at least you can change things up to make room for your fun night without ruining your budget or screwing up your finances. It’s way better to need to be cheap for a week than to spend, spend, and spend with no understanding of the hold you’re digging!
Believing you can track your accounts in your head
People might not use checkbooks like they used to, and we have reasonably constant access to our accounts because of the internet. Neither of these things mean you can just assume you know how much money you have or have spent. People tend to underestimate how much money they’ve spent, be it drinks at the bar or groceries in their cart, and that leads to overdrafts and just overextending your finances, which leads to ruin.
A budget – even if it looks bad – will still keep your spending accountable and after a while you’ll realize just how much each little thing you buy adds up. You can also see how you’re spending your money over time, in relation to your moods or the seasons, something you can’t do if you try to keep a ledger in your head.
Budgets are for people who are good at math
You absolutely don’t need a degree in accounting or an algebra hobby to create and maintain a budget. In fact, a budget might make you more math-savvy. Personally I love using Microsoft Excel to create a budget, but you find what works for you.
Even if you’re just using a notebook and pen, a budget will help you and the only thing you need to understand is subtraction and addition.
Budgeting – successful budgeting that is – requires you to be diligent and committed, but that’s it. Even if things get screwed up, if you’ve been on-point tracking your incoming and outgoing money, you can find the error and get back on track, no big budget movie-math needed.
Your finances are way too messed up for a budget
This one is the biggest offender we hear about – people who think they’re too far in debt for a budget to help. This couldn’t be farther from the truth because people with significant debt are the ones who need a budget the most. Even if your incoming funds are less than your outgoing payments, a budget will help you utilize your money in the most productive way to get you on track to paying your debt off once and for all. Without a budget, you’ll likely continue to tailspin until you have to use debt consolidation or bankruptcy, a place where nobody wants to be.
Regardless of your debt situation, a budget – and the help of a financial coach – can get you on track to fixing your finances. Never underestimate the power of decluttering your debt and how a clean, organized budget can help you see how effectively you’re allocating your money.
You make enough money and don’t need to budget
Maybe you’re not used to working paycheck-to-paycheck or you’ve left your high-debt days behind you. Perhaps you’ve got a great job and plenty of spending money, so you’re not worried about a budget. These are awful, terrible excuses to not have a budget and you could be on car accident, medical expense or termite infestation away from being in the hole.
Many financial experts agree that people should have at least 3 months’ wages set aside for unexpected bills. Most people, on the other hand, don’t even have $1000 saved up, something that Dave Ramsey suggests is the most important step to financial security. What’s worse, people’s spending tends to increase when their income increases – we tend to inflate our standard of living when we start bringing home more money. Maybe this means eating out a few nights more or going to the casino boat on a regular basis, but without a budget, you’ll be losing more money than you can count on small, random things.
A budget can help you take that “extra” money and apply it in a meaningful way. Whether that means college, a trip to Italy or a brand new boat, having a clear budget with tracked income is the fastest, safest path to your goal.
You need a budget, not excuses
Creating a budget and sticking to it is the easiest way to financial freedom. If you’re looking to make a big purchase or pay off a longstanding debt, using a budget – spreadsheet or notebook – will help you organize your efforts in a productive, clear way.
Not having a budget is simply not acceptable if you’re an adult with goals that require money. Without a budget you can’t really understand if you’re paying down the right debts first, what loans or cards are actually getting paid down, or if you’re making headway on that down payment for your dream home. It will also protect you from spending inflation; if you’ve ever wondered why your friends with two high-salary jobs are struggling each month, it’s probably because of spending inflation. Don’t be them – use a budget!
How long did it take you to understand you needed a budget to fix your money worries? Let us know in the comments – you never know who needs to see how budgeting helped other people!