With income inequality growing ever wider, it’s becoming increasingly important that people start living on a budget.
Budgeting your day to day expenses isn’t hard when you know how to budget your living expenses , and where to find the resources that allow you to cut as many corners as possible.
According to Paul Krugman, a Nobel Prize winning economist, Americans’ incomes never go far enough to satisfy their monthly needs, and I think you’d agree that this is even a common trend in most parts of the world.
After paying for basic living expenses like housing and groceries, there’s very little left over for extras like retirement savings, college savings, or entertainment. This trend has been attributed to poor spending choices.
More than 130 million Americans do not have a Budget Plan.
Contrary to what many believe, living on a budget does not restrict you. Instead, it gives you the power to spend your hard earned money in a manner you should, not in a manner you want to, and in most cases it can stretch your needs further.
Once you begin living on a budget, you will really start saving more from your paycheck. You’ll be able to notice where all your money is being spent and it allows to make adjustments accordingly.
I’m sure that if you take a moment and think about it, you’ll realize that a lot of your spending goes toward things that you don’t really need and this has become a trend in many households.
Spending ten dollars at Starbucks on a daily basis translates to a lot of money in 360 days.
This alone takes from you all the big things you have been dreaming of. It is worth noting that life’s little extras are ideally within the reach of everyone as long as you are being smart about your spending habits and you are living on a budget.
For your better understanding, it is wise to first understand what a budget really is and what it means to our families.
Here is a more comprehensive definition of a personal budget
A personal budget is a financial plan over a set period of time with future income allocated toward savings, personal expenses, and debt repayment.
Usually, an average individual takes the following steps to create a simple yet effective budget plan:
- Identify your total income during the budgeting period. This is usually a month for most households
- Write down all your expenses
- Plan according to the budget and stay within the budget estimates.
It is wise to be realistic when constructing your budget.
It is a wise idea to cut back your expenditure. To be even more realistic, start with more changes, this will be a huge change over time.
For example, if you are addicted to eating burgers on a daily basis, cut it down to five times weekly, and so on. Evaluate the things that you do not really manage like your data packages, phone plans, cable package and others.
Learn to make your budget fun, and if possible, include the family members, let them contribute.
Award those family members who save most on their part. Agree on achievable savings and spending goals that everyone can stay within.
Here are a few reasons to start living on a budget
Realistic Budget frees up your money for the Fun Activities.
People fear that living on a budget will deny them the opportunity to spend their money on doing what they love most, going for a swimming session, gymnasium, having a good time with the family and friends, etc.
However, once a plan has been established and put into practice, most people realize that a budget is a tool that will guide you to stop wasting funds on items and little things that are unnecessary or things that you do not need and frees up more money for the a activities that you enjoy.
A budget is a Great tool for Preparing for emergencies.
Pay Attention! Something in your life WILL go wrong! It may be today, tomorrow, a few months to come or even a year’s time but I assure you, it will happen.
Imagine you lose your job today and you do not have even a single penny in your bank account.
What do you think will happen if you break your laptop, TV, or some other important asset?
Living on a budget will allow you to cut down on your expenses and save a little money each budgeting period for unforeseen emergencies.
Living on a budget can get you out of debt, and keep you clear of future debt.
Recent data shows that an average American citizen owes about $10,000 on their credit card.
This does not even touch on the hundreds of dollars we owe car dealers, mortgages, and student loans debt.
Americans are good borrowers, and it is an epidemic. It recently appeared in major headlines that one major cause of American divorces is heavy borrowing by partners.
Developing a budget that all family members can stick to and live with will ease the debt burden. It is prudent that every member of the family curb their spend thrift habits, live more sensibly and realistically.
Budget releases stress.
Money matters are the major household stress inducers.
To get peace of mind, do your budget, stick to it and adjust where necessary. If possible, budget for everything including your entertainment.
You Know How Much Money You Have.
Just as you’ll know exactly how much money you’ve spent, you’ll know exactly how much money you have.
If you’re living paycheck to paycheck and wondering where your money is going every month, you are not managing your money properly. Once you create a budget, you may be pleasantly surprised to discover you have more money than you thought.
You Can Pay Yourself First.
Living on a budget makes saving money an immediate goal. Reward yourself by putting a line in your budget to pay yourself first, before you pay anyone else.
It doesn’t matter whether the amount is ten dollars, fifty dollars, or a thousand.
After all, you are the one who works hard for your money, so you should be the first one to benefit from it. Even putting aside a small amount for yourself every month will keep you motivated to stay on budget.
These are just a few ways that having a personal budget can benefit your life.
Making one could be the difference between having enough money and just scraping by. If you’re unsure of the advantages of having one, consider living on a budget for just one month.
You may be surprised at how quickly it helps to improve your personal finances.