Do you really need a budget? Isn’t that just a boring list of numbers that means you never get to spend money on what you want?
A budget is really just a way to take control of your finances. It does not necessarily mean you can’t ever spend your money on what you want; it just means you spend your money smarter. In fact, if you are always denying yourself and never buying anything you want for fear you can’t afford it, a budget could be liberating. Dealing with real numbers tends to be a lot less stressful than dealing with vague impressions of your income and expenses.
So how do you know if you need a budget? Here are some tips to help you know if you need to form a budget.
1. Your credit cards are never paid off.
If you are paying only the minimum balance on your credit card, and/or using one credit card to pay off another, then it’s time to work out a budget to get out of that hole.
2. Money “burns a hole” in your pocket.
Do you feel like you have money for a moment or two, then it’s gone? This could mean you have too many expenses, or that you are too quick to spend on wants rather than needs.
3. You don’t put any money into your savings, or you are random about how much and when you put money in.
Having a savings plan is an important aspect of financial management. If you don’t have any regimented plan for putting money into savings – say the first 10% of your net income always going to savings, or all bonuses from your workplace going straight to savings – then your savings will tend to languish as you keep spending on things you want.
4. You don’t have a savings account at all.
If you don’t have any savings or emergency fund, it may be a sign that you need a budget. A good family budget can help you make savings a priority.
5. You’re always saying, “I can’t afford it.”
Do friends ask you to go out to lunch, or to an event, and you say you “can’t afford it” all the time? This may be true, or it may not be; forming a budget will help you know what you really can and can’t afford.
6. You never seem to have enough.
Money can be deceptive – what seems like “plenty” can suddenly be not enough. Forming a budget can help you get a grip on what you really have; you may be pleasantly surprised that you do actually have enough, or that it’s feasible for you to make some strategic cuts so that you will have enough.