If you haven’t noticed, budgeting is hip again these days.
This is thanks to the economic uncertainty caused by the stock market’s second worst bear market in the last 100 years. People’s fear of losing their jobs and significant losses in their investment accounts has shifted the importance of financial planning and knowing how to budget back into the spotlight. But there are still people resistant to both of these ideas.
Here are some common excuses, and why they can hurt your savings:
Not Good With Numbers
It doesn’t take a mathematician to implement a budget. You just need an understanding of how much money is coming in and which directions it is flowing out. You could use an online tool or scribble down your monthly income minus your fixed bills every month to get an idea of what’s left for discretionary spending. When creating a budget worksheet, it’s important to consider 12 months of expenses in your budget, as there is often a lot of variance month to month. Using a year of spending targets also provides the framework to make corrections when you have a few months go over your budgeted amounts.
Don’t Have Time To Budget
If you have 15 minutes every two weeks you can manage a budget. Most banks now allow you to download your spending data into budgeting software in a matter of minutes. If you can limit your spending to two accounts (checking and credit card) you will also cut down on time. Spend a few more minutes on categorization and you’ll be able to tell if you need to tighten up for the second half of the month or if you are on track with your targeted spending patterns. Conducting regular monthly reviews will go a long way in helping you to have a successful household budget.
Buy Now. Save Later.
Sound familiar? Spending now instead of later is a major roadblock to implementing a budget. This behavior will eat completely through any shell of a budget discipline you attempt to create. The danger with the “buy it now” mentality hangs on the standard of living concept. Most of us become comfortable with a certain level of spending and it’s a lot harder to lower that standard once established than it is to increase it. Don’t let bad spending habits dictate your budget decision-making.
We Only Live Once.
While this is a true statement, it amounts to a hill of beans when you actually need to access savings. As the latest economic crisis has clearly proven, a job loss can wreak financial havoc when you don’t have an emergency fund. Spending like there is no tomorrow will leave you ill-prepared if you find yourself unemployed. This is why it is imperative when setting up your spending categories to carefully consider how much will go towards your savings accounts. Setting up a monthly draft from your primary checking account is a good way to build your emergency fund while also providing a natural discipline for your spending.
Spending Is More Fun!
There is no doubt the instant gratification you get from purchasing an expensive meal out, a new big screen TV or a trip to Europe is very satisfying. But making those purchases within the parameters of a budget doesn’t drain all the fun. Budgeting tools simply help you to take control of your overspending habits. The power of budgeting comes from knowing where you stand and recognizing the next steps you should take to achieve your targets. When setting your targets, make sure you carve out the extraordinary and the semi-regular expenses that could ruin your motivation as well. Remember, delayed gratification is a budget’s best friend!