The 6 letter word that makes you duck for cover. We all know we should have one but how many of us actually do? Are you living pay day to pay day counting down the days until the next instalment? Credit cards spiralling out of control as you struggle to make ends meet? or, do you simply have no idea how you are going and just flying on a wing and a prayer hoping that it will all just work out?
If you answered yes to any of these than a budget can quite simply change your life. Even if you are making more than you spend a budget can make a huge difference to your overall financial health by putting your hard earned cash to work for you rather than throwing it away on the latest shiny new ‘thing’.
So why do you need a budget? Let me count the ways . . .
1. It will ensure that you don’t spend money you simply don’t have
After my last blog I think we all familiar with Generation X’s love affair with debt so this point may be hitting home for many. The problem with plastic is that many people aren’t even aware what they are overspending on their cards until they are literally drowning in debt. The good news is that if you create and stick to a budget, you’ll never find yourself in this precarious position. You’ll know exactly how much money you earn, how much you can spend and how much you need to save – Perfect!! I know that keeping track of a budget isn’t nearly as much fun as going on a shopping spree with your Visa Card. But would you rather be going on that dream holiday or putting a deposit down on that home you’ve been saving for or making an appointment with a debt counsellor this time next year? l know which one I prefer.
2. It will help you identify your ‘bad’ spending habits
Are you guilty of throwing your hard earned cash away? Building a budget forces you to take a really close look at your spending habits. When you do this you may notice that you’re spending money on things you simply don’t need. If you are really honest with yourself, do you honestly watch all the channels on your Foxtel subscription? and, do you honestly need that new pair of shoes? Budgeting allows you to rethink your spending habits and re-focus on your financial goals.
3. It will help you prepare for emergencies
Life is filled with surprises, some better than others. If you lose your job or become sick or injured it can lead to some serious financial stress. Often these emergencies arise at the worst possible time – when you’re already strapped for cash. This is exactly why everyone needs an emergency fund of at least 3-6 months of living expenses.
This extra money coupled with income protection insurance will ensure that you don’t spiral into the depths of debt after a life crisis. To get started set yourself realistic goals and start small. Even if you can only save as little as $10 – $30 each week, your emergency fund will slowly build up. You just need to start.
4. It sure beats counting sheep
Are you tossing and turning at night worrying about how you are going to pay the bills? Following a budget will give you back some control, see a way out and give you more of that blissful sleep you are yearning for.
Some pretty compelling reasons to get started don’t you think? But where do you start? The first step is to put aside an hour of your time to work out where exactly your money is going right now. You will need the following to help you with this part:
- A budget planner
- Bank Statements (personal accounts and credit cards)
- The last copies of your bills (if you don’t pay them online)
Given that our salaries go straight into our bank accounts and the ease of paying bills on line, its easy to get all the information we need from our bank statements. Keep in mind that some bills are quarterly so you may need to go back 3 months to see how much you are paying for gas for example. If you are a cash is king kind of person then you may also need copies of your bills that are paid for in cash as well to build your budget.
There is a great simple budget planner available on the Money Smart website which can be found here:
If you are like me and like to be able to customise your input then I also have an excel spreadsheet that I have developed just for you. Send me an email and I’ll be sure to get it to you: firstname.lastname@example.org
Once you are up and running its important to then keep track of your day to day expenses to ensure that you stay on track, there are lots of apps out there that you can use such as Good Budget and Track my Spend which are available on both iphone and android. Try them out and see which one suits you best.
And lastly, be sure to follow me on my Facebook site Oxley Bridge Advice. Like the page and you’ll be sure to never miss any of my financial tips.