Today we have a guest post from Jennifer Collins. Enjoy!
Do you have a budget? Most of us will make up a lot of excuses for not having one, but the reality is that we’re only hurting ourselves. I’ll explain why you need a budget asap.
Some of the excuses we make may include:
- A lack of time
- That another family member is managing the bills
- That you have enough money to pay all expenses
But sometimes, you may ask yourself why there is little money left in your bank account. You also may not be sure why and where you spent the money.
The primary reason for spending too much money is an unhealthy relationship with credit cards, coupled with the absence of a budget. If you are not paying off the credit card bills every month, it will increase rapidly due to interest expenses. If you have a budget, and stick to it, it will help you to spend according to your earnings and to save accordingly. Sometimes you may spend more than you earn, which is what gets people into the trap of personal debt.
Another reason for financial difficulties involves using more than one credit card. Companies like Ovation Credit know that if you are paying with multiple credit cards and running up balances on each, your credit score will suffer. Your life will revolve around credit card debt and interest.
A budget is necessary for every home. Why? There must be some savings for emergencies. Think about a situation that could cause you to run out of money, like losing your job, facing a huge expense like needing a new car, etc. In circumstances like these, how will you manage your expenses?
Most people don’t have an idea about how to use money properly. They buy liabilities instead of assets. People spend too much money unnecessarily. Start by assessing your spending habits. Keep a record of everything you buy over the course of the next seven days, then determine how many of your expenses are necessary. You may be shocked to discover just how much you spend on frivolous items.
Most of us love to go out for dinner, but never think about the bill. Paying $25 for a plate of pasta and $9 for a glass of wine is a luxury when the same meal at home will cost 50-80% less. Also, while going to the supermarket, you may end up buying too many groceries without thinking. You must have an idea about how much amount you have available to spend each week.
We’re not saying to not have fun, but if you’re struggling with debt, you need to put aside some money to clear your debts before eating out, buying clothes, etc.
You must also have a clear cut idea about how much money there is in your account. After the expenditures of the week, check the balance and give more attention to your spending habits.
Do you have savings? If you want to travel abroad or if you want to buy a house you will need a lot of money. So watch the credit card debt, credit score, and your savings.
If you are coming to grips with the real need to have a sound budget, but unsure of where to start, simply follow these two steps: track your spending for a week and adjust your lifestyle to reflect your income.
It isn’t wise to depend on credit cards or the fleeting enjoyment of an impulse purchase to obtain what you can’t afford.
If these steps still sound too abstract, try this: take five blank envelopes and write the words: groceries, rent/mortgage (whichever applies), utilities, transportation, and fun on the front. Now apportion no more than 90% of your monthly income to these five areas by putting cash, yes, cash, into each envelope. Try to avoid the temptation to switch money from one envelope to another throughout the month, if possible. This ‘envelope budget’ is a great way to get one’s spending under control while saving at least 10% of your monthly income for emergencies.
You might also enjoy the posts: How to Easily Start a Budget and Organize the Rest of Your Finances, 12 Beloved Historical Thriller Books or Important Mistakes to Avoid When Renting a Home.
By Jennifer Collins reveals how designing a budget can transform your bank account, and provides ideas for those in need of a financial makeover. Jennifer Collins is a staff writer at vpsi.org, who writes on financial and economic trends. When she’s not working, she is baking or playing with her cat, Ivan.