Do you have a budget for your household? Your income is your most powerful tool to be able to build wealth, and to make sure it doesn’t go to waste, you absolutely need a budget!
How can you make your income, (of any size), work for you if it’s all going out the door before you even get a chance to make a plan?
It’s a common misconception that only people that make huge incomes can become wealthy. It’s actually every day people that are patient, persistent, and goal oriented that are able to keep a budget, thus managing their income well.
Why do we need to budget the income of the family?
You need a household budget if you are going to make any progress toward your financial goals, big or small. It’s so important to work together on this as a family, and that everyone agrees with the plan for it to work.
A budget is a tool that helps you see how much money is coming in, and how much is going out.
If you’re like most Americans, there might be too much month at the end of your money.
In fact, 80% of Americans live paycheck to paycheck.
Yes, even doctors, lawyers, and other “white collar” professionals. It doesn’t matter how much money you make if you don’t know how to manage it!
Related Post: How to Pay Off Large Debt Fast
What happens when you don’t budget?
People spend money without a plan, take out student loans in frightening amounts, and buy cars and houses because they deserve them for working so hard.
It seems almost ridiculous that household budgeting is not taught as a core subject in school.
Before we dive into exactly what a budget can do for us, let’s consider what will happen if we’re not tracking income and expenses.
My husband and I thought we were doing a great job financially because we always pay our bills on time, use coupons, shop sales, and drive reasonable cars. We have never bought a house, because we didn’t want the extra financial stress while we were getting settled into our careers.
It wasn’t until we financed our podiatry practice that things started to spiral out of control.
- TOO MUCH DEBT: Our debt payments became so much of our income each month. We were basically working to make payments, and not really getting anywhere.
- NO PLAN: We had no plan and therefore, as long as there was money in our bank account we would still make random purchases.
- NO COMMUNICATION: My husband and I never spoke about money to each other. I would sit down and pay the bills by myself, and my husband trusted that it was done and taken care of.
Make sure you are budgeting, and not simply monitoring your bank account!
About a year in to running our new medical practice (also without a budget), I realized we were out of money. We looked up to well over half a million dollars of debt.
I always use the Mint app to track our spending (which I told myself was budgeting). I pulled up the Mint app on my computer and went through our expenses.
There it was. Miscellaneous spending for the month of December: $3,000.
How? Why? Where was this money going?!
It wasn’t one huge purchase. It was little things here and there.
A cute bow for my daughter, new ornaments for the Christmas tree, a Starbucks here, and a Target stop there.
Those little things add up so fast when you have no plan!
You’ll also like: Are you Budgeting or Monitoring your money?
Here are 5 Important Reasons You Need a Budget for your Household
If you are ready to start your budget and organize your finances grab my totally free budget toolkit here!
A Household Budget Tracks Exactly Where Your Money Is Going
My husband and I are now super intentional about where our money goes each month.
We have monthly budget meetings, and discuss our finances frequently throughout the week.
I don’t worry anymore about how we will be able to pay the bills, because we already have it mapped out at the beginning of the month.
It’s crazy how we let ourselves get completely overwhelmed and stressed out about money, when something so simple as having a written plan can take away so much fear and anxiety!
A Household Budget Helps You Identify Things You Waste Money On
Lord only knows how much money I have spent at the Target dollar spot.
What are you mindlessly spending money on every week that you could be using to pay off debt or save for your future?
- Do you have subscriptions that you’ve had for years but never use?
- Could you be making your lunch instead of hitting up the fast food chains on your break?
- How much did you spend at Starbucks last month?
Really dig in to your spending habits, eliminate what you can live without, and make a written budget for the rest.
Yes, you can absolutely still spend money on fun things, but set aside an exact amount so you don’t end up spending your electric bill money on an online shopping spree.
Trim is an app that will analyze your spending habits and also identify any unused subscriptions and cancel them for you!
More on Saving Money:
- How to Declutter and Organize Your Finances
- How to Get Free $5 Starbucks Gift Cards
- 12 Tips to help you STOP wasting food (and money)
A Household Budget Allows You to Actually Make Progress On Your Savings
I remember thinking to myself that there’s no possible way people save up cash for a down payment on a house.
How is that even possible? We can’t save $5, and we are supposed to save tens of thousands?
Well, yeah! If you have no clue where your money is going and have no plan, you will never make progress on your savings goals.
A budget helps you plan for the future.
A Household Budget Prevents DEBT!
If you don’t know where your money is going you will inevitably be spending more than you make.
This will cause you to run out of money, and need to reach for a credit card or loan to make ends meet.
When you have a budget, you know exactly how much money is coming in, and then you can decide what you will spend it on.
If you just rely on how much is in your bank account that day, you don’t have a plan and you will start using debt as a resource.
Related Post: How to Pay Off Debt Fast
A Household Budget Gives You Freedom!
A budget is not restrictive at all.
I know, when you hear the word budget that’s what you’re thinking.
I always thought a budget was for people that had no money or are struggling to get by.
Get over that mindset y’all! A budget is SO powerful. It protects you and your family, and brings an overall sense of peace in your finances.
You need a budget for your home, like YESTERDAY, so get started!
Related Post: How to Make a Budget for Beginners