Five Signs Your Finances Need The Benefits of a Budget
The benefits of a budget are well documented yet few people get excited by the word. In fact, according to a debt.com poll, only 25% of people think they need a budget. Most people associate the word with maintaining stringent self-discipline, cutting back on their favorite things, clipping coupons, and eating instant ramen. However, sometimes a budget is exactly what you need to get your financial life back on track. This is especially true if you strive to save more money, pay off debt, or repair your credit.
Five signs you need the benefits of a budget
What are some signs that you would benefit from a budget in 2020 and beyond? In this article, we’re going to share five of the most common ones, so you can examine your current lifestyle and decide whether or not a budget is right for you. Spoiler alert: a budget is a good idea for most people.
You can’t remember the last time you deposited money into your savings account
When was the last time you contributed to a savings account? If you simply can’t remember, then you may be putting yourself at risk for financial ruin. In the event of a major medical event or other emergency, would you have enough money to cover the expenses?
By making a commitment to setting aside just $20 per week, you can start saving a significant amount of money, which you can eventually use for emergencies, retirement, a college fund, or even a vacation fund. If you, like most Americans, are struggling to save that money, then it’s time to create a budget and stick to it. The benefits of a budget are too many not to.
You don’t know what your monthly grocery bill is
If you don’t know where each of your hard earned dollars goes, you can never truly have control over your finances. You are most likely overspending and slowly leading yourself down a negative financial path. This is where the benefits of a budget come into play.
When it comes to your groceries, print out a few bank statements and get an idea of how much you have spent over the last few months. From there, come up with a dollar amount that you can fit into your budget. For example, if you spent $700 on groceries but you need to be in the $600 range, you need to come up with a plan to get you there. Doing things like meal planning, coupon clipping, switching grocery stores and keeping track of your spending will help get you there.
You’re living paycheck to paycheck
Are you the kind of person who lives on boxed macaroni and cheese until your next paycheck arrives because you can’t afford to go to the grocery store? Do you have strategic tricks for using credit cards, so you can make it from one pay period to the next?
Living paycheck to paycheck means that you’re using most or all of your monthly income to cover your expenses for that month. Anyone who has experienced this situation knows that it can be very stressful. Cut back on some of that stress by implementing a budget.
When you are intentional with your spending, you are better able to make buying decisions with clarity. For example, if your friends are heading out for dinner and a movie, you will know whether it fits into your budget. You’ll also feel good knowing it was a thoughtful, deliberate decision.
You have no emergency fund
Life is full of surprises and some of them come in the form of a broken AC unit, a bathroom leak, a root canal or worse yet a lost job or a car accident. If you don’t have money saved to put towards these unexpected expenses, you could wind up in financial ruins. For this reason, you need an emergency fund. Your goal should be at least three months of your living expenses in savings. Set up automatic savings where you put a set amount into this fund every paycheck. The goal is to pay yourself first.
Without this extra savings on hand, you may reach for your credit card which will have you paying back money for the foreseeable future. If you do use any cash from your emergency fund, be sure to put it back.
You can’t afford to pay off your credit cards every month
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Are you carrying a balance on your credit cards from month to month because you can’t afford to pay your credit cards in full? If so, your financial hardships could quickly spin out of control. If you’re not careful, you may amass an overwhelming amount of debt.
Protect your credit score by establishing a budget and sticking to it. When you follow a budget, you get a better sense of where your money goes, so you can have enough to pay off your credit cards and ultimately your debt.
There are so many benefits of a budget
Not many people like the idea of living on a budget, but your wallet and future will both thank you if you’re able to stick to a budget and make it work for you.