Are you one of those people who hear the word budget and immediately roll your eyes? Do you freak out when thinking about budgeting? You are not alone! In fact, two-thirds of American households don’t have or follow a budget. That hurts my soul because there are so many reasons why everyone needs a budget. I wouldn’t have enough time in the day to go through them all.
If you have lived life with and without a budget, you probably feel how different your money is. A budget can help you feel empowered and more on top of where your money goes. Not having a budget can do the opposite. It can stress you out and make you wonder what happened to all of your money, even when you just got paid!
Is that not reason enough to need a budget?! Well, just in case it’s not, I’m sharing 5 reasons why everyone needs a budget. I would also highly encourage you to listen to CGS Podcast Episode #3: Breaking Through The Stigma of Budgeting to help you overcome your fears or negative mindset towards budgeting!
What is a budget?
Before I dive into the reasons why everyone needs a budget, I want to quickly breakdown what a budget is. There’s a misconception that a budget is some scary process or thing that means a person can’t do anything or enjoy life. That is far from the truth. The reality is that a budget is simply a tool. A tool that shows you the money that should be coming in, the money that should be going out, and what’s left over after.
It’s what you do with that information that determines whether you can or can’t afford to do what you want. The entire purpose of budgeting is to make sure that your current income covers your expenses and spending. It also tells you that you could be overdoing it when it comes to enjoying yourself. If you have certain financial goals you are working towards, a budget can help you get there.
A budget is not a scary thing. In fact, it’s an enlightening thing! It can bring so much clarity to your financial situation. That alone can make you feel less stressed about money and more empowered to do what you’re supposed to do with your income.
Reasons why everyone needs a budget
Now that you know what a budget is and how it can help your situation, let’s dive into some of the most important reasons why everyone needs a budget.
You don’t know what you’re spending
The number one reason why everyone needs a budget is because without one, you don’t know where your money is going. You have no idea if you are spending hundreds of dollars each month on food and drinks. That’s where most of my clients’ money goes before they start working with me!
You have no idea if you can afford to put more towards your debt payments, because you think your money is taken up by other things. When you have a budget, you know what you should be spending your money on. This makes it much easier to give yourself limits on the things that can suck your paycheck dry!
You don’t know how much you could be saving
Just like you don’t know what you’re spending your money on when you don’t have a budget, you can take it a step further and say you don’t know what you could be saving. If you aren’t following a budget, money is likely slipping through the cracks. That means you aren’t putting as much money into savings as you could or should be. All that does is hurt your financial freedom progress.
You don’t know what you’re capable of
Imagine if all it took to save an extra $250 a month was to set and follow a budget? Wouldn’t you do it? That’s another important reason why people need a budget, because they don’t know what they are capable of. They could be paying off debt faster, saving more money each month, or making the right moves to reach a financial goal they have. Knowledge is power my friends, and a budget brings a lot of knowledge to the table.
You don’t know what’s hurting your numbers
Without a budget, you don’t know if there are certain things you are spending money on that you don’t need or don’t use. If you could cut out certain expenses you forgot you had or you don’t use any more, you could keep more money in your pocket! A budget will bring those unwanted or unneeded items to the light. Then, you can get rid of them!
You don’t know if and when you can reach your goals
You’re a smart cookie. I know you have hopes and dreams. We all do. However, if you don’t have a budget, your hopes and dreams may always be just that. A budget will help put into perspective how long it will take to reach a certain goal. This will allow you to make adjustments to your situation, like cut back or make more money, to help you reach your goal faster.
Tips for following your budget
Reasons why your budget didn’t work before
Maybe you understand why a budget is so important. Maybe you’ve even created a budget in the past. What if that budget didn’t quite work for you? Well, there could be a few reasons why your budget wasn’t a success. Off the top of my head, I can think of:
- Your budget didn’t account for discretionary spending (going out to eat, shopping, etc.)
- Your budget was not realistic for your situation ($100/month on groceries for a family of 2 isn’t reasonable)
- You didn’t account for unexpected expenses (every budget needs a miscellaneous category)
It’s not always easy to pinpoint why your budget didn’t work. Often times, you need an outsider’s perspective to help. If you have tried a budget in the past and it didn’t work for you. Schedule a free consultation with me and let’s talk about it. As I mentioned earlier, 20% off services is happening now!
Let me share a few tips for following your budget:
- Track your spending against your budget. If you don’t track your spending, how do you know if you’re staying on budget?
- Give yourself cash for discretionary spending. When the cash is gone, the spending should stop.
- Budget for fun. Include the things you enjoy in your budget, just make sure it’s in moderation.
Related: Top 5 Tips for Staying on Budget
Now that you know how important a budget is and why you absolutely must have one if financial freedom is something you’re striving for, it’s time to take action! I want you to sit down and create a budget for the month. If you’re lost and don’t know where to start, let me help! I can create a budget plan for your situation. Get started with a budget plan now.
Do you understand how important a budget is for you? What is stopping you from creating or following a budget? Leave a comment below to share. I would love to chat about budgeting with you!