I remember a time when I didn’t keep a household budget and ended up in the red every payday. And I don’t know about you, but that gets really old after a while but I couldn’t figure out how to get on top of it. Until I scrutinized every penny I made and brought into the house. I created a household budget, which is a great tool to see at a glance what I have coming in, what’s going out (and what that money is paying for), and what’s left at the end of the month.
Before I dive into exactly what a budget can do for you, let’s consider for a minute what will happen if you’re not tracking income and expenses. You may end up spending more than you’re making in a given month (or two, or three). Over time that can put you into some pretty hot water financially. You may also spend a lot more than you’d like on things like eating out, going to the movies or new clothes.
I don’t know for how long I was feeding the bank with overdraft fees and crapped on my credit because I didn’t make the use of a budget – for my household or even my business. But for the last 5 years, I learned that having a budget is a good thing because it gives you more control over the money I have and how I would like to spend it.
So what does a having a budget do for you?
It Tracks Where Your Money Is Going
A budget simply tracks your money. You record where the money comes from each month (your income) and then write out everything you spend it on, starting with your regular monthly bills like mortgage or rent, car payments, utility bills, etc. What’s left after all the bills are paid is your discretional income.
Helps You Identify Things You Waste Money On
Having it all in front of you in black and white helps you identify things you’re wasting your money on. It makes you reconsider if you really want to spend well over $200 a month on Cable TV or $150 on your large cell phone plan. Or how about that yearly magazine subscription to something you no longer read? Go through your expenses and reevaluate if this is REALLY how you want to spend your paycheck.
What I like about my review of my budget is that I can often find money I can save or maybe even finagle a deal if I want to retain a service or subscription.
Allows You To Be Proactive About Savings
Saving money without a budget is hard. We go in with the best of intentions at the beginning of the month, but somehow there isn’t anything left at the end of the month.
A budget gives you a chance to be a bit more proactive. Set aside some money for savings at the beginning of the month, even if itís just $20. Put it in the budget as a regular expense, just like you do with your other urgent bills. If you need to, open a separate saving account so you’re not tempted to spend it.
Ensures You’re Not Spending More Than You’re Making
Most importantly, your budget will keep you on track and help you make sure you’re not spending more than you’re making. And I don’t have to tell you that thatís pretty important for your financial wellbeing.