It’s been a while since we’ve talked about this, but it’s time to remind everyone again: you need to start budgeting your money. Most people hate when we say things like this but you know we’re telling the truth. No matter how good or bad the economy is, many people end up in trouble because they’re not verifying that they have enough money to pay their bills and pay for things they want instead of things they need.
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When things start going badly, you need to be prepared and know how to handle your money, whether you’re working or not. Maybe you need to dip into savings or go on a payment plan for some of your bills. Without knowing what your general cash flow is you’re going to be in trouble.
Here’s 5 reasons why you need to learn about budgeting; they’re eye openers!
1. Can you pay all of your bills?
When times get tough, bills don’t suddenly go away. As a matter of fact, bills become very oppressive because they’re harder to pay, even if you’re working. The price of almost everything keeps going up and the reality that your money is tight is a horrible slap in the face.
You need to know that you have the money to pay your bills, and how much left over you have for other things… if you do. You also need to know when you need to pay your bills on a regular basis. Budgeting is the only way it can be done.
2. Can you cover your necessities?
Bills are one thing; buying staples you need (think food, toilet paper, etc) on a consistent basis, paying for clothes to replace what wears out, putting gas in your car… Without a budget you’re not sure if these things get taken care of.
What a budget will help you figure out is the difference between necessities and wants. At the very least you get to decide what your necessities really are and what’s more important than something else at a moment’s notice. I’m not the type to tell people they should give up their coffee or things they enjoy, but if there are multiple things that are for enjoyment rather than necessities and your money is tight you have big decisions to make.
3. Can you put money away?
Having a budget helps you determine if you have extra money to put away from time to time. Why do you need to think of this? How would you do this?
What would you do if suddenly you had to buy new tires for your car, especially now that they tend to run close to $150 per tire unless you can find a deal? What about the brakes on your car, or the transmission? What if a window broke? What if your heating bill was higher than normal one month? Putting extra money away helps you to get through emergencies, and budgeting will help you get there.
Maybe you’d like to invest and grow some of your money passively. By budgeting, you might find that you have at least $50 to $100 a month that you can invest without it hurting your bottom line. You can accrue a small bit of wealth if you can afford to invest your money long term, and it also leaves you a cushion to borrow from if something catastrophic happens and you need to use some of it. If you never have to touch it until retirement, or even early in retirement, even better.
4. Would you like to have a little leisure time?
With a budget, you’ll know if you can afford to go to the movies, take a trip or even spend a few dollars to go to dinner or the casino. One of the tricks of budgeting is learning how to move money around so that you can have some fun here and there with extra money. If you’re not making enough money, you need to know that before you blow a significant amount on those Lady Gaga tickets.
We know too many people who believe that the costs of a vacation aren’t anything to worry about until they get back home. We’ve also known a few people who find that they spent way more than they could afford for the experience. A budget will let you know how much you can spend on your vacation and how much more you’ll need if you want to have a great time.
5. Would you enjoy some peace of mind?
The two biggest worries most people have are relationships and money. Budgeting can’t help with your relationship, but it can help you achieve peace of mind so that you can concentrate on other things, including your relationships.
With a budget, you’ll know whether or not you have enough money so you don’t have to worry about whether you can pay your bills or be scared of an unknown expense popping up. You’ll know if you can go out to dinner or a sporting event at the last minute. You’ll know that no matter what comes up, you not only can cover it but you can probably rebuild your extra money quickly because you’re used to doing it. Of course you might have other problems getting in the way of achieving total peace of mind, but money won’t be one of them.
Have we convinced you that budgeting and knowing about personal finance is the way to go? If so, we’re willing to help you figure out how to budget and grow your money from there.