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I’ve written over and over again about how to create a budget, but I’ve never really touched on why living on a budget is so important to your financial success.
Let’s say, hypothetically speaking, that one day you look up and realize you are typical.
You have a bit of credit card debt, a student loan, a car loan, a mortgage and if you are particularly unlucky you have medical debt, payday loan debt . . . . . the list goes on and on.
Virtually everyone I talk to has some level of debt in their lives.
Some people are actively working to dump their debt. Unfortunately, most are just content to make minimum payments and hope that in the far off future their debt magically disappears.
#HardTruth – Guess what, if that is your attitude you’re in trouble. Debt is constantly growing unless you are actively making moves to decrease its effects.
Debt never sleep.
It has an insatiable appetite and if we aren’t careful, the interest on your debt will quickly drown you.
Why does living on a budget matter?
Budgeting is the quickest way to get out of debt. It is just that simple.
When my husband and I got married we had $446,000 in debt. 5 years later we had paid off $293,000 in debt using a budget. There is no way we could have shrunk our debt so quickly without using a budget and a personal financial plan.
I know that most people hear the word budget and immediately think “I have to limit my spending”. This is so far from the truth.
When done right a budget can be the most freeing personal decision you’ll make. To see an example in action, check out this post on how being debt free affected us when I became pregnant.
When you create a personal financial plan (you can download a free financial plan example here), you are giving yourself permission to chose a financial path.
When creating a budget it is important to remember a budget is more than just listing your income and expenses and then tracking them. Creating a successful budget is more than just giving yourself a gold star if you manage to hit your numbers.
Awesome budgeting is giving your money direction. It is telling your money where to go, rather than having your money tell you where to go.
When you have the ability to control your money, it opens up a whole new world for you. It may take time, but as you learn to control your spending, you will get out of debt. As you pull yourself out of debt you will discover a whole new world of possibilities.
A budget brings order to chaos. Oh, there is the occasional outlier who can manage their finances without a budget and do fine, but most people need at least a general framework.
Seriously though, budgeting is very simple. It is sticking to the budget that is a bit more problematic.
Sticking to the budget is what sets successful people apart. They know that by living within their means they are exponentially helping themselves in the future.
Having a budget gives you the freedom to spend your money in the method you choose. Obviously, you still need to make your payments, but what it does is help you control the rest of your spending.
A budget helps you channel your discretionary spending.
I know that for many people, there isn’t such a thing as discretionary spending after the bills are paid. I’ve been there, it really sucks.
I will promise that if you start budgeting you will find extra money. I don’t know where it will come from, but as you begin to track your spending and make wise financial decisions you’ll start to notice where you are draining money.
You can’t plug a drain until you find the leak.
If you are struggling to control your spending I recommend checking out How to Find and Eliminate Spending Leaks In Your Budget. It is my own class, so I’m a little bit biased, but it is a great class that will help change the way you look at your spending habits. It is all about transforming your spending patterns to eliminate the spending leaks we often ignore.
If you have hit the next phase and have some discretionary spending, then you have discovered that your money still seems to disappear.
Before I started budgeting consistently, I would look up at the end of the month and realize my money was gone and I had nothing to show for it. And more importantly, didn’t have a clue where it had gone.
It is very easy to spend the extra money we make when we aren’t actively watching and monitoring our spending. Just today, I placed an $80 order on Amazon. It wasn’t anything major, but it would have been so easy to add a few things to the order that have been on my wishlist for a while.
Technically I had the money in my budget, but I’ve discovered something fun about budgeting.
I like to beat my budget. It is kind of a game with me.I like to beat my budget. It is kind of a game with me.Click To Tweet
I love being able to “win” in certain categories.
If I can beat myself in certain categories, then the money ends up in my slush fund. My slush fund is currently being saved for new couches, carpet cleaning and professional deep cleaning of my house as soon as our last pet is gone (two weeks from now). I’m seriously so excited.
Budgeting is more than just the numbers.
If you choose to budget, you will be more successful with your financial planning. After all, if you can learn to control your money you will never have to worry about it controlling you.
For help on budgeting here are a couple of additional resources:
- How to create a budget
- How to budget if you have an irregular income
- The Two unbreakable rules of budgeting
- How I busted my budget and what I learned from it
Questions of the day: Why do YOU need a budget?
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