Living on a Budget
No one wants to live from paycheck to paycheck, but it happens when we don’t plan ahead. Without well-stocked financial reserves, many of us are caught with nowhere to turn when unforeseen expenses crop up. Most people in this situation turn to credit cards or payday loans as a way of getting through the rough spots, but using high-interest credit also has its drawbacks. The interest you’ll pay on high-interest unsecured debt is extremely high. If you didn’t think you could make it before – without this extra cost – how will you make it over the next financial hurdle?
The answer, of course, is to plan ahead and live on a budget. These are not sexy, glamorous, or new strategies for getting ahead in life. You won’t see ads for budget planning on late-night TV infomercials. No hot celebrities will be touting the benefits of planning for the future. It’s not a get-rich-quick scheme. In fact, most people think budgeting is pretty boring.
If you use your imagination, though, you might think about how much safer you will feel with money in the bank, or how much you will be able to save on interest when you don’t have to turn to high-interest lenders for help in the lean times. If using your money wisely sounds like a big snooze, try thinking of it as avoiding the evil credit trap. Go ahead and put on your superhero costume. We won’t tell anyone.
If you’ve never set up a budget before, don’t worry. It’s not all that difficult. If you are the type who keeps receipts from every purchase, budgeting will be much easier. Take a look at your receipts, and categorize them according to the expense. Review how much you’ve been spending on groceries, gas, eating out, travel, and entertainment. Set reasonable spending limits for these categories, and list all of your regular expenses such as rent or mortgage, insurance, and bills.
When you add it all up, do your budget amounts come in higher or lower than your income? If you’ve been living within your means, your budget will not eat up your entire income. If you’ve been overspending, now is the time to think about how to trim unnecessary expenses out of your life.
Other important things to consider:
- How much are you putting into savings each paycheck? Most experts recommend paying yourself first. If you’re on automatic deposit, have a portion of your check sent straight to your savings account. You’ll never see it, and chances are, you won’t miss it.
- Don’t forget recurring expenses that happen less than once a month. Things like auto maintenance, birthday gifts, travel, and holiday spending should get their own budget category and regular deposits, just like your savings account.
If you are realistic when making a budget, it will be easier to stick to it. Before long, you’ll enjoy greater financial stability and you can proudly wear that superhero costume everywhere you go (although we don’t recommend it).