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What is a budget? Ask three people this question, and you will get three different answers. The word budget is scary for a lot of people and comes with all sorts of negative feelings about deprivation and sacrifice. In truth, a budget it just a spending plan. Spending is fun, right? But you’re a smart, savvy person. You handle your money just fine. Why do you need a budget? Let me explain.
Reduce your stress level (with your budget)
Wait, what? Don’t budgets stress you out because you have to stick to them? Nope! When you have planned how you want to spend your money, then you are free to spend without guilt or worry. If you want to buy a new shirt, just check your clothing category in your budget. If you have the money, you are good to go. You don’t have to wonder if buying the shirt will cause you to be short on rent or gas.
How many times have we spent money and then regretted it later because we couldn’t pay an essential bill? A budget prevents this from happening.
Eliminate or avoid debt (with your budget)
Are you in debt like me? Did you get in debt by spending more than you were making? A budget helps you STOP living beyond your means. One of the biggest changes I made when I started truly budgeting with YNAB was that we stopped going into more debt. In the past we used the credit card if I wasn’t sure how much money we had available. We wanted to be sure we didn’t overdraft our account, so we charged it. (That’s not a good strategy, by the way.)
Now that we have a working budget, we check the budget before spending money. If we don’t have money in that category, we reevaluate. We may still spend the money by changing our priorities and using money from a different category, but at least we are really thinking it through before we spend.
Plan for YOUR priorities (with your budget)
Do you want to save for a vacation? Do you have any extra medical expenses or kids’ activities this month? What about saving for retirement? These are all questions you can address when you are planning (budgeting) your spending. What’s important to me or the big financial experts may not be important to you. The beauty of a budget is that it lets you prioritize your spending.
Do you want to save the extra $20 towards vacation or use it for entertainment? What other category could you reduce to pay for summer camp? Focus on what’s important to you. You won’t feel forced into sticking to a budget if you are putting your money towards your important things!
Prepare for large, infrequent expenses (with your budget)
Have you ever been surprised by your car insurance bill? Do you seem to fall short every year at Christmas? Is there ever money available for your oil change? We all have expenses that we KNOW will happen, but they still tend to sneak up on us. A budget helps you plan and save for these expenses.
Do you pay your car insurance every six months? Wouldn’t it be great to save $50 a month and pay that bill stress free? That sounds way better than scrambling to find $300 in one month when you get the bill! The same is true for Christmas or birthday presents. If you decide how much you’d like to spend, you can save a little each month so you are ready to spend (guilt free) when the time comes!
Face the truth (with your budget)
My husband and I lived in denial for a long time. We rationalized our spending, complained that we didn’t make enough, and basically just ignored our credit card balances. Let’s get real. We were spending more than we should. Our income would be enough if we didn’t have so much debt. Our debt balances and interest were overwhelming. Sound familiar?
This might be the hardest but most important component of budgeting. You have to face your crap. WHY are you overspending? Are you trying to fill a void? Are you afraid to say no to your partner or your children? What do you ultimately want for your life? Some of these questions can be tough but make a world of difference once you are honest with yourself.
Have I convinced you that you need a budget? I think you do. I think we ALL do. It really makes my life so much easier. Do you love it or hate it? Let’s hear it! Comment below!