A Budget Can Change Your Financial Future

2/9/2015

Regardless of how much or how little you earn, there is one single thing that may be keeping you from a secure financial future: a budget.

INBbudgetingWithout following a budget plan, you’re likely spending much more money each month than if you were to be cognizant of your spending habits and reducing your expenditures. And when you’re spending that money, you can’t save it.

Any kind of saving is related to budgeting. Learning to handle your money allows you to start putting your money away for yourself — for retirement, for annual vacations, for your children’s college expenses, and for emergencies that inevitably occur.

When we see people struggling from paycheck to paycheck, it’s usually not because they don’t earn enough money — it’s that they don’t handle it properly.

The first step we take when helping someone to create a budget is to circle “payday” on a monthly calendar.

Then we write down every bill and when it’s due – from utility payments to car loans to when you buy your groceries. If you don’t have a check register, you’ll need to look at your online bank statements or receipts from the month. Any credit card debts should also be listed, with a plan formulated to pay them off as quickly as possible.

Once your expenditures are all in front of you, you can focus on the areas that can and may need to be reduced – typically areas like eating out at restaurants or going out to the movies.

Another large problem people encounter with their finances is that they erroneously believe that if their debit card works, they have the money in their bank account. This leads to overdraft fees that could have been avoided.

You need to commit to a budget like you do with a healthy diet or any other lifestyle change. We encourage people to get into a routine of paying their bills as soon as they get paid, as well as paying themselves first – in the form of savings – before they even consider hitting the mall or trying a new restaurant. (Paying your bills immediately not only will help you manage your money properly for the rest of the pay period, it will also improve your credit score!)

Setting up an automatic payment to your savings account is a fantastic means of “forced savings,” which means you ultimately treat your savings account like a bill that has to be paid.

Just like seeing your weight drop once you make healthy living choices, you’ll be able see progress in your financial life once your budget is in place and you commit to following it. It is only when you stick to a budget that you are able to avoid overdrawing your account, your bills are paid on time, and you can begin saving for the future.

To learn more about setting up a budget, check out this online budgeting tool and watch a video about how to create a budget.

 

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