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Writing about a budget is similar to discussing an emergency fund. Both are underappreciated and can be overlooked. Need proof? Only 39 percent of Americans have enough money to cover a $1,000 expense. What a horrific little factoid this is.
To me, budgets and emergency funds kind of go together. If you have an effective budget, you can get the emergency fund built up in no time. But if the budget is out of whack, you are going nowhere in a hurry. And the only emergency will be your 70 year old self still needing to be employed in the workforce. No thanks.
Why A Budget Is Important
I must confess, I have kept a budget spreadsheet for a few years now. I love it! The spreadsheet is nothing fancy. Simply an Excel file that adds up our various monthly expenses and subtracts them from our income. Nice and easy.
There was a time, probably a year ago, when I stopped budgeting for a few months. Life went on, our finances didn’t sink. However, I realized I missed it. Mrs. DS would attest that I’m not the most organized person in the world, but I am tidy when it comes to the budget!
So why is it important to have a budget? Well…..
1. A budget reveals the overall health of your finances. I pay close attention to the monthly gap between income and expenses. The further the gap widens, the happier I am. A budget makes this so easy to see.
2. A closely watched budget can stop you from keeping up with the Joneses. Thinking about adding a new Mustang for your available third garage stall? Sorry player, the spreadsheet says no dice.
3. Waste is easily identifiable. We all have our own necessities that we need to spend on. But how about the dining out, alcohol, and entertainment portions of the budget???? Or are those the necessities? Hah!
4. A successful budget gives you positive monthly momentum! Few things get me as pumped as seeing a beautifully constructed monthly plan be executed. And then to clear it and start over fresh the next month. Ahhhhh so refreshing!
5. Budgeting helps you achieve goals. Need to know how long until you can afford a Disney Cruise? Maybe you need to put new shingles on the roof. Your budget will be your guide to tell you how long it will take to come up with the cash needed for your goals.
Budget Crushers To Keep Under Control
Here are some of the main monthly culprits that can cause you to live paycheck to paycheck if you aren’t careful.
The Big Hitters– Mortgages, Car Loans, Student Loans, Daycare. Obviously these items will crush your finances faster than most others.
Mid Level Money Suckers– Cell Phones, Cable/Dish TV, Insurance, Food/Restaurant. These items may not seem like much compared to the “Big Hitters”, but when added up they can count against you in a big hurry!
Tips For A Tidy Budget
1. Live Within Your Means- This is the best financial advice I’ve ever received. The thing is, everyone has different circumstances. Personal finance is indeed personal and unique on an individual basis. Basically, don’t buy a 3,500 square foot house if you can only afford 1,500 square feet. If a Benz is out of your price range, a Ford will do just fine. Be real with yourself.
2. Pay Off Your Loans ASAP- Even if you live within your means, you will most likely have loans at some point in your life. It happens. The good news is, each one that you pay off will help widen the aforementioned gap between income and expenses! And every dollar saved in interest is better in your pocket than in your lender’s.
3. Negotiate Monthly Service Plans- I can’t stress this one enough. Make sure to take advantage of all of the competition each company faces for your business. I routinely call my TV and internet providers to lower the price of service. You may have to do a little homework to find out what the competition offers but it is worth your time.
4. Shop Around For Insurance- You will most likely leave hundreds of dollars on the table if you don’t shop around for insurance periodically. I personally know of people who have stayed with the same carrier for years. When I hear how much extra they are paying for vehicle insurance it blows me away. Loyalty is good, but don’t be taken advantage of because of it.
5. Eat At Home- Dining out often can be a wallet killer. Not only is the food costly, but once you add in some highly marked up adult beverages, the bill escalates quickly! If you can keep this under control, it will do wonders for your bottom line.
If you are having trouble coming up with extra money to save or invest, zero in on your budget. Make a simple spreadsheet and track every single expense. It’s super easy to do and you might actually find it fun to analyze like I do!
By chiseling away the wasteful spending, you will create a budget masterpiece even Leonardo da Vinci would admire!