Why Should I Have a Budget?
Budgeting is a smart thing to do, especially when funds are limited. Taking a $5,000 vacation when you are worried about your job and your mortgage? Not a good idea! However, in the quest to remain on top of one’s finances, it is possible to become too frugal, which can ultimately undermine budgeting efforts.
Let’s say that you are on a diet and decide to eat only the healthiest food. No chocolate. No pasta. No fast food. Ever. How likely is it that the diet will be successful? Not very. For most people, high-fat food tastes better, and if they try to stick to a diet of whole wheat and carrots, they will just wind up getting frustrated and quitting. Sticking to a diet is easier if you allow yourself to have a slice of chocolate cake once in a while.
It works the same way with budgeting. You want to pay all of your bills on time, save money, and avoid debt and tell yourself that you are only going to spend money on bare necessities. No dining out. No cable. No vacations. No movies. No books or magazines. No hobbies. This budget may be doable for a couple of months but probably not much longer.
Instead of cutting out pleasures completely, look for ways to do them for a reasonable price. Do you like eating out? Go to restaurants that cost $15 a meal instead of $50. Or if you really want to go to that $50 restaurant, eat out once a month instead of once a week. Like traveling? Take day trips near your home (you won’t have to worry about paying for airfare and a hotel) or forgo vacations for a few years so you can splurge on a two-week trip to Europe. Love reading books? Check out the used-book store. Or better yet, go to the library – they still exist!
Even if you are looking for ways to lower costs, you may not have enough money to buy or do everything you want. Forgoing some luxuries makes it easier to splurge in other areas. Think about what is most important to you and what doesn’t matter as much. If you love going to the opera, you don’t have to automatically give it up because you are on a budget. Free up cash by buying generic brands at the supermarket. Bring your lunch to work instead of eating out. Get your hair cut once every three months instead of once a month. On the other hand, if you’re a foodie, you may want to sacrifice going to the opera and other entertainment activities so that you can eat lunch out and get $15 cheese at the supermarket.
Being financially responsible does not mean that you have to live the life of a monk. It will be easier to control your spending and save if you leave some room in your budget for fun. The best way to get through hard times is to take a few deep breaths and implement a budget you can live with.
Ideas For Your Budget
You might find it obvious that evenings dining out at fancy restaurants probably aren’t the best idea when experiencing a budget crunch. But think about your groceries too. Consider avoiding the higher priced stores and stocking up on the basics at the more reasonably priced spots. You might find that cooking at home and taking your lunch to work saves you lots of money and ends up being healthier too.
If you’re like most people, your visual entertainment comes from multiple sources. You may watch movies on cable, in the theater and via rental. In budget crisis situations, it’s best to focus on watching movies at home and using one particular way to do it. In other words, if you have both Netflix and premium movie channels, it’s probably time to go with one or the other.
It’s nice to use a smart phone to be able to look up information on the go, but you could probably make do without the data plan if you had to. Call your service provider to ask them to perform an analysis on which plan is best for you. You might be paying for more than you actually need. Also consider eliminating your house phone if you have one.
Shopping as entertainment
One activity that could put you in the trouble zone is shopping for fun or to ease tension. “I won’t buy anything, I’ll just browse” too often can lead you down the path of unnecessary spending. Eliminate leisure shopping or other activities that put you in temptation.
Is it an option to work from home more? Can you carpool or combine your errands into fewer trips? If your family has multiple vehicles, can you sell one and share the remaining?
With the ease of using the Internet to compare rates, the insurance business is much more competitive than it used to be. Shop around for the best deals on any type of insurance you have—auto, home, life, etc. Check into bundling these with one company to save even more.
Think of ways to stay warm or cool more efficiently. Put on more layers in the colder months and spend more time outside during the warmer times. Be conscious of turning everything off and even unplugging electrical items when you leave a room.
When you have a comfortable financial situation, it’s easy to buy coffee, cigarettes, alcohol and convenience store snacks without thinking too much about it. But in these tighter times, think about what you are really getting out of these purchases and if there are expenses that are more important.
eBranch Financial Wellness Widget
One simple way to start and keep a budget is by using the Financial Wellness Widget in Idaho Central’s Online Banking System, eBranch. The “Spending” tab in the Financial Wellness Widget helps you track and manage your personal finances. It provides a spending overview, with spending categories for transactions, and information on recurring expenses. You can also utilize the “Savings Goals” tab in this widget to set and keep track of your savings goals. Managing your finances is easier with the Financial Wellness Widget from Idaho Central Credit Union.
None of these measures alone is guaranteed to immediately solve all your fiscal problems, but with time they can potentially save you hundreds of dollars per month and put you on a path to financial success.