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Did you know that there are people who hate budgeting? We all know that this is a financial habit that everyone is encouraged to practice. Regardless of how much you are earning or how much money you have in your accounts, it is important for you to implement a budget. According to the data found on BLS.gov, the average annual expenditure of American households increased from $51,408 (July 2012 to June 2013) to $51,933 (July 2013 to June 2014). This is a 1% increase. While 1% may not be alarming to you, it is alarming once you realize that the average income before taxes is decreasing. Based on the data displayed on the site, the average income went from $65,029 to $64,432 - all during the same period. This is a decrease of 0.9%. If you know that your income is not increasing in the same rate as the cost of consumer goods, you need to be very careful about how you will spend every penny. This is where budgeting comes into play. When you use a budget plan, you can create a spending behavior that will not go beyond what you are earning. This is very important because spending beyond your income means you are already in debt. If you continue spending this way, you might end up drowning because of your growing balance. A budget plan will help you gain insight about the overall state of your finances. If you need to spend on something, you simply have to consult your budget so you can decide if you can afford it or not. This is possible because your budget contains information about both your income and expenses. In case you cannot afford to pay for something and you cannot pass it up, you can still consult your budget. You can search for expenses that you can forego so you can afford this new financial need.
3 reasons why people hate to budget and the reality behind the excusesAlthough budgeting is obviously a necessary financial activity for everyone, there are those who still find an excuse to not do it. According to a poll done by Gallup.com, only one out of three Americans create a detailed budget. When we say detailed, we mean a budget plan that is written or computerized. This study reveals that the majority are not budgeting - or at least, they are not doing it the right way. If you really want to budget, you need to have a written form of it somehow. Apparently, a lot of people are not doing this. Most of them have come up with excuses that justify the lack of budget in their financial lives. Here are the top three “I do not want to budget” excuses that people make and the real reasons behind them. Excuse 1: I am not good with math. Reality: You cannot accept how much you are really spending. Budgeting involves a certain level of calculation. But it is really not as complicated as you think. The most simple budget plan only involves getting the sum of your expenses and subtracting that amount from your income. If you get a positive answer, then you know that you are on the right track. If you get a negative answer, then you know you have to change something about how you are spending. The thing is, creating a budget plan is a step by step process. You just have to wrap your head around the idea we just mentioned - your income should always be greater than your expenses. Once you are deep into that, you will know the next calculations that you have to do. It will not seem complicated once you have started the process and you know what you want out of your finances. If you are really poor in math, do not make that as an excuse. You can always get in touch with a professional to help you out with your computations. You are probably just scared of what you will see after you do the math. If you really want to improve your finances, you have to face the numbers that your budget plan will show you. Excuse 2: It’s a waste of time. Reality: You do not understand the benefits it will bring to your finances. People who say that budgeting is a waste of time do not understand what it is all about. If you do, you will not say that it is a waste of time. You will know that it is something that you have to do and practice in your life. There are so many benefits to having a budget plan. Early in this article, we have mentioned some of them. But beyond the finances, there are a couple of non-financial benefits to implementing this in your life. For instance, the money stress that you will feel can be lessened. In case there is something that has to be paid, you can identify the expenses that you can forego so you can afford to spend on something new. Your budget plan can also assist you in reaching your financial goals. Once you realize these advantages, you will never think that budgeting is a waste of your time - no matter how long it will take to create and monitor them. Excuse 3: It’s just too much work. Reality: You do not have a budgeting strategy. Admittedly, creating your budget for the first time is tedious. You have to observe your spending for a month. This will help you determine the extent of the corrections that you have to do (if there is any) in order to improve your finances. After that first month, you need to analyze the expenses that you have listed and then you can decide how you can make everything fit into your limited resources. Once you have created your first budget, it is only a matter of revisiting it every now and then so you can realign your budget to fit the changing priorities in your life. With a bit of research, you should be able to find tips to help you simplify your budget plan. There are budgeting strategies like the envelop method that does not involve a lot of computations. You just have to divide your cash based on a pre-determined percentage of your income. Place the cash in envelopes labeled with categories that indicate where there will be spent. Once the money in the envelop is gone, you stop spending. It is as simple as that. That is surely not much work to do, right?
5 questions that will help make your budget plan bearableEven if you get past these excuses and you have created the budget plan that will take your finances to the next level, you need to keep yourself from feeling too relaxed. Understand that the plan was just the first step. You need to follow the plan that you created - otherwise, your efforts in creating it will be for nothing. To make sure that your budget plan will be followed here are 5 questions that you need to ask yourself as you create it.
- Is it realistic? While you may have a target amount each month, it is important that you consider what your household budgetreally spends each month. Regardless of your financial targets, it will be very hard to make a family of 4 live on a $1,500 budget - especially if you live in an expensive city. Take this into consideration and balance it with your financial targets.
- Is it updated? Some budgets may not work because it failed to take into consideration certain changes in your lifestyle. Your budget as a single person is different now that you are married. The same is true if you start having children. Think about these and update your budget accordingly - specifically your expenses.
- Is it aligned with your priorities? We all have life goals. If your budgeting efforts and plans are not aligned with your goals in life, then it would feel wrong for you to follow it. Define your priorities first before you create your budget plan. That way, you can consider them while you construct your budget.
- Are you using the right tools? Budgeting, while it can be done manually, does not have to be. You can use various tools that will make it easier for you to create and monitor your budget. If using your budget seems hard, you need to look for the right tool that can help make things easier. A lot of financial tools can make your budget plan accessible from your smart phone. You can even connect it to your phone so your plan is automatically updated as you make financial transactions.
- Are you committed to your budget? Finally, you need to ask yourself about your commitment to your budget. This is especially true if it is something that you are not used to having in your life. It takes commitment to go through all the sacrifices that will help you improve your finances. If you cannot commit, then you will not be able to successfully implement your budget.