Top 5 Reasons a Budget REALLY Matters

Do you find yourself thinking, “I thought I made a decent amount of money, but how am I so broke?”

I felt the same way a few years ago. Money came in each month and went out just as fast. It felt like I was in one of those old cartoons where you’re standing on a spinning log in the middle of the river, running, running, running and getting nowhere until you finally fall in.

And I did! (Big splash!)

Bombarded with credit card debt and student loans the size of some people’s mortgages, my head was definitely spinning. To say I was overwhelmed feels like an understatement.

I had a financial spreadsheet that I did religiously each month, but it didn’t seem like I was making any progress at all. It wasn’t until I got some financial guidance, that I realized that my spreadsheet was just a spreadsheet and NOT a budget. How did I not know the difference? A Budget is a plan, all I had was a list. I needed to create a budget. I needed to take my INCOME and expenses, put it on my spreadsheet for one month at a time and work through my debt. I needed to tell every single dollar I earned where it needed to go BEFORE the month started.

So why does a budget even matter?

1) A BUDGET TELLS YOU WHERE YOU ARE – Do you know where you are with your money? A budget can help with that. Take all of your debts and your income and put it on one page. This is a crucial component of a budget. Now, you know can visually see where you are financially. Do you owe more than you make in one year?

The first time I did this, I about fell on the floor.

How could I have amassed so much debt?! I owed so much more than I made in a year and had no clue how to dig myself out. I told myself before doing this, "Life happens." Yeah, life happened several times and I wasn’t obviously wasn't prepared for it. I didn’t have an emergency fund and relied on credit cards to get me out of situations over and over again. I used my credit cards as an emergency fund! So dumb...I just didn't know .

Well, those credit card swipes added up! And, some of the swipes cost me up to 28% interest!

Know where you are. How much consumer debt do you actually have? And, when we say debt, we are looking at everything except the house. This includes credit cards, car loans, personal loans, student loans, 401k loans, money owed to family, etc. Add it all up together and KNOW where you are.

2) A BUDGET HELPS YOU PLAN WHERE YOU WANT TO GO – Now that we established where we are, where are you trying to go? For me, my goal is to become debt free, establish a 3-6 months emergency fund and eventually purchase my first home or condo.

What is your goal? Where do you want to get to? Are you saving for your first home? Trying to get out of renting a place but can’t seem to make any progress? Do you want to pay off your current home and stockpile your income for retirement? Or, do you have kids and want to make sure you have college funded for them?

Remember a goal is written down, otherwise it is nothing more that a wish. Whatever your financial goal is, having a budget will make getting there much easier and faster.

3) A BUDGET CREATES A WRITTEN PLAN, WITH MONTHLY UPDATES – This is one of the keys I was missing. I didn’t have a plan for my money. Let me say that again because it's SO important.

I didn't have a plan for my money.

I was allowing my money to simply go out the door as quickly as it came in. It felt like I couldn’t make money fast enough. I was often relying on my sad savings account or credit cards to cover me. I had more month left when the pay check ran out! In other words, my paycheck wasn't covering my monthly expenses. It was one of the worst feelings, especially since I typically work 60-80 hours a week!

Not only does your budget help you with where you are, where you are going, but it is a map of how you are going to get to your financial goals. Budgeting tells each dollar where it will go and when. You are sending out marching orders for each of those dollar bills each month and you will KNOW exactly how much progress you are making towards your financial goals.

4) A BUDGET REDUCES SURPRISES, ANXIETY AND OVERWHELM – I think this surprised me the most about creating a budget. I remember at one point not wanting to open my mail because I knew every piece of mail was a bill. “People wanting money from me,” I thought…not realizing that it was actually me having to pay back what I had already spent.

I would procrastinate opening the mail and then finally face the fire, costing me even more money as I now got slapped with late fees for procrastinating so long. Good grief Charlie Brown! I paid a lot of Stupid Tax.

When I had a budget, a money plan, “I” was in control. The mail no longer mattered because I knew what was coming ahead of time. I had a plan. I no longer paid late fees and wasn’t procrastinating over doing my “bills.”

My anxiety around my finances was at bay, I felt calmer than I ever had in my life and I wasn’t super overwhelmed each day. In fact, I was sleeping better! How could that be?! Having a plan (budget) and writing down where your money will go, on paper, on purpose has brought so much peace to my head, my heart and my physical well-being. I no longer stress out over a bill I forgot to pay, I don’t push mail aside, or play the “robbing Peter to pay Paul” credit card game. My stress level is at the lowest it’s been since my early 20s.

5) A BUDGET HELPS YOU WIN WITH MONEY – Having a budget creates a path to help YOU win with money! In my past, I tried to pay down debt only to find that I ended up at the same amount or more by the end of my short-lived plan. I was not getting ahead and my "plan" was really just a wish that I wasn't taking seriously. I had no way to measure what I was doing, if it was working and where I could improve. And, I was spending WAAAAYYY too much money because I didn't realize how much spending money I truly had. I thought I had hundreds each month, but really I was upside down because of my monthly bills.

Budgeting not only helps you establish where you are, where you want to go, how to get there and reduces stress and overwhelm, but a creates a way to finally WIN! Had I not taken these steps to create a Budget in January 2018, I wouldn't be where I am today. I have paid off nearly $77,000 dollars! Had I not done this, my head would still be swimming with an additional EIGHT credit cards and THREE student loans to juggle each month. Yes, I paid off EIGHT credit cards and THREE of four student loans! I can't tell you what a relief it has been for me that I did this work.

If I can do this, a person who made so many mistakes with money, so can YOU!

You just need a budget and the drive to get it done. I promise, it is so worth it to begin winning with money!

If you are looking to get in control of your finances and get rid of your credit card debt, create a budget for yourself and stick to it. You don’t have to have a spreadsheet or fancy software. A piece of paper and a calculator will do just fine. It won’t cost you a thing and the peace of mind you will find when you gain control of your money is more valuable than anything you can purchase with a credit card!

And THAT, I know from personal experience!