Budget. It’s a word that often times makes us feel restricted or depressed. I mean, a budget does in fact tell you how you are supposed to spend (or not spend) your money, right? Yes is the fast answer but the longer answer is a budget literally tells your money what to do. If you don’t tell your money where it should be going I promise you will wake up and wonder where on earth it went.
A statistic from May of 2018 showed that 57% of Americans have less than $1,000 put aside for an unexpected emergency. Another stat showed that almost half of US households monthly expenses are either equal to or MORE than what they make in a month.
This is crazy and is just out of control spending! Budgets have a way of giving you a raise! Not because you actually got a raise at work but due to getting organized and being on purpose with your money.
I know you need to save more so you have a cushion if something happens. I know budgets scare many. And I know that some would rather live in a jungle than create a budget, but trust me, it’s worth it!
Let’s take a look at four things a budget will do for your life and family.
- A budget shows you where you are over spending so you can shift “found money” to a more productive place.
Overspending is the #1 reason you don’t have any money!
Often times we really don’t know what we are spending or how much we spend on certain items. It is very important to have a set amount for eating out, gifts and several other categories.
Let me ask you a few questions to get you thinking. Answering these questions will allow to you make better decisions with money and ultimately free up money in your budget for other things.
- How often do you go out to eat each week?
If you were to go out to eat with your family 2 times a week (which is less than average) then you will spend approximately $70 for those 2 meals. My guess would be much more, but maybe you are ordering water instead of overpriced drinks. 🙂
Let’s do some math – $70 a week times 4 weeks a month is $280 a month on FOOD! Keep in mind that this total is very low seeing as most Americans eat out at least 4 times a week. $280 isn’t a ton but it IS money for your ROTH, your 401K, an emergency fund OR to pay off debt!
- What do you spend on gas each month?
Gasoline for your car is a must. No argument here. However, you need to know how much you spend so you know how much to set aside each month for this necessary expense!
We pay for gas in cash. This might seem ridiculous to you but I never run short at the end of the month – so stay with me!
I know that we rarely go over $500 a month for gas. We pull that out in cash and pay for our gas in cash EVERY time! We never have to use a credit card for gas because we budget for it and set the money aside in advance.
- Keeping More of Your Hard Earned Money by Paying in CASH!
- How to Save Over $11,000 for a Car or Anything Else You Want in ONE YEAR!
- 5 Tips to Raise Kids Who are Good With Money
- Eight Tips for Paying Off Debt Fast
- 26 Reasons You Need an Emergency Fund
Do you have money set aside for gifts (birthdays, anniversaries, etc)?
Gifts can be a huge budget buster for a family! Birthday parties that your kids are invited to and trying to celebrate others you love too. It adds up! If you don’t have an envelope set aside for this type of category then these type events will sneak up on you every single time! We set aside $75 a month for this category and there is always money there when we need it.
- How do you pay for things that are not “regular” expenses?
This could be anything from tires, yearly vehicle inspections and registration, life insurance, and so on. These items will pop up and will bust your budget because you didn’t plan for them.
We have set aside a fund that we call “yearly obligations.” Here is how you can do the same.
Make a list of all of the yearly expenses you have with the total cost right beside it. These are all yearly/semiannual or quarterly expenses. Do not include your monthly bills or expenses in this total. Here are a few of mine to help you get your list started:
- Vehicle registration
- Vehicle inspection
- Life insurance
- Professional dues
- Identity theft protection
- HOA fees
From this list add everything together so you have a grand total. This total will be the amount needed on a yearly basis for irregular expenses. Now you will divide the grand total into how many paychecks you get each year.
Here is an example: Let’s say your total is $1200. You will take $1200 and divide that by 24 (if you get paid twice a month) giving you a new total of $50. Now, you plug $50 per paycheck into your budget! Every time you get paid you will pull out $50 and put it into savings. This way there is always plenty of money for all of these irregular expenses.
- Do you eat out for lunch every day?
This is a big one! If you average $5 a day (which is pretty low) times 20 days a month (this would be working 5 days a week for entire month) then you will have spent $100 just for lunch. That’s $1200 for an entire year! I suggest brown bagging it most of the time and give yourself one day a week to go out. Put the rest into your debt, a retirement account or set it aside for a summer vacation.
- Do you frequent places like Starbucks on a weekly basis?
We call Starbucks “Five-Bucks” at our house! Mainly because you can’t get out of there without spending about that much. Don’t mis-understand me. I love Starbucks but I don’t love spending money on coffee or a latte that would have bought a whole CAN of coffee for the same price.
Let’s run numbers on this one. $3.50 a day for a latte times 20 times each month is $70. That’s over $800 a year! For coffee!!! Suddenly that coffee tastes very bitter to me.
2. A budget gives you somewhere to aim when you are reaching for a goal.
When you are driving a car where do you look? Out the front window or in the rear view mirror? Kind of a dumb question but you get my point here. I know for a fact you want to dominate your money and financial life. That is why you are reading this post!
Putting yourself on a budget is like handing you a bow and arrow and allowing you to point it at exactly what you want! If you want to be out of debt and you set a realistic goal of 12 months to get there, often times, with a budget in place, you actually do it!
One of my favorite sayings I heard my dad recite most of my life was, “If you shoot for nothing, you hit it every single time!” This is SO true! Point your arrow and fix your eyes on what you want with your money by setting up a budget. That will be the starting point of something great!
3. A budget allows more money for investing.
How many times have you heard people say that they don’t have enough money left over to invest for the future? Dozens and maybe hundreds! Here is a big one, so listen closely.
The reason you don’t have enough to invest is because you don’t have a budget.
Trust me when I say that your money will disappear in a flash when you don’t tell it where to go. Sitting down before the month begins and writing down every source of income, then telling it where to go is like magic! It suddenly gives you a raise and makes you feel like you have several hundred more per month. The reality is you aren’t making more – you are spending less and that feels REALLY good when there is extra!
4. A budget allows you to do things you really want to do!
One of the best things about a budget is YOU can put whatever YOU want into your plan! If you want to go out to eat, then put that into your plan. If you want to spend $100 a month on new clothes, add that in. You get to tell your money where it goes and what it does just as long as your bills are paid and you are taking care of your future.
When we went through our debt free journey (you can read about that here) we had to make huge sacrifices. However, it was only for a season! Now, we travel, pay for cars in cash, and can do just about whatever we want to do. The budget was hard at first and seemed restricting. But we knew that it was just a temporary situation. We totally understood that on the other side of that season would be a bright future with nothing but possibility!
Let’s close this out by saying that a budget is not a bad word. It is a plan that will direct your money and will ultimately allow you to create wealth. Wealth that will affect not just you in the here and now but your children and grandchildren for many years to come.
Come on! You can do this! Your family, your future, and your dreams are depending on it.
Always in your corner. XXOO