A budget is a tool that allows you to take a good, hard look at your finances: what income is coming in, what expenses are going out, and what that leaves you with, if anything.
A budget can allow you to save toward a goal, such as a vacation, new car, or a kid’s college fund. It can also help you build up an emergency fund, so you have a financial buffer in case any unexpected expenses arise that you weren’t planning on. A budget can keep you from using too much credit, and it can give you peace of mind that you won’t spend beyond your means.
If you are experiencing any of the following issues — from paying bills late to forgetting to adjust for things like inflation or life changes — you might have a budgeting problem.
Putting Too Much on Credit
If you find yourself frequently using your credit cards to fill in the gaps for expenses that should be covered under your normal expenses, you may have a budgeting problem.
Experian suggests that too much credit card use is a sign of overspending and bad budgeting (or lack thereof). Keep in mind that when running a credit card balance, you are also adding hundreds if not thousands of dollars in interest that you also have to pay back.
Better budgeting can potentially help you to avoid this outcome.
You Can’t Afford Bills or Are Frequently Late Paying Them
A budget is a tool that helps you assess how much income you have coming in and how much in expenses is going out. If you budget properly, you should be able to account for all your bills, especially your regular, recurring ones.
So if you’re finding yourself unable to pay bills or paying them late, Experian suggests it’s a sign that it’s time to reconfigure your budget.
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You Have No Emergency Savings
If you are someone earning a living wage that covers your expenses and leaves a little extra, you should really be putting money aside for emergencies, according to The Nest. If you don’t have any extra, it’s a telltale sign of a budgeting issue.
A budget should help you take a close look at just how much money is leftover after paying all your bills, and could also point out places where you can cut out expenditures in order to put money into savings.
You Don’t Make Adjustments
If you put your budget together in 2020 and haven’t changed it since, chances are — just considering things like inflation and high gas prices — your budget will no longer reflect reality, and you might find yourself pinching pennies.
According to The Balance, you should adjust your balance periodically, especially if there are changes in your income or expenditures or major life events like moving, having a kid, marriage, divorce or something similar.
You Didn’t Budget for Annual Expenses
When people make theirs budgets, they tend to focus on regular, monthly recurring expenses that crop up like weeds. But if you don’t factor in annual expenses, you’re going to be caught off guard several times per year when payments for insurance, property taxes, or other annual bills show up.
Factor in these costs and put away money toward them every month, as well.
You Aren’t Sticking To It
Your budget is a powerful tool — but only if you use it. Just writing it down, or plugging it into an app, isn’t going to help you reap its benefits. You have to commit to your budget and be dedicated to it if you want to get the most out of it.
You’ll feel it when you aren’t, because you might not have enough money for a bill or money to put in savings. So, stick to a budgeting method that is most practical for you.
Household Members or Spouses Aren’t on Board
If you are part of a couple or live in a household where you share expenses with others, remember that you have to factor everyone into your budgeting. If you’re sharing expenses, then other people have to be willing to stick to the budget, too, or else you’ll run into problems.
Make sure you’re very clear up front about the budget’s parameters, and get some kind of buy-in from others so they don’t sabotage all your best efforts.
You’ve Set an Unrealistic Budget
If your budget is planned down to the dollar without any flexibility, or you’ve allotted more money to things that you don’t need, you might have an unrealistic budget that you’re working with.
According to Money Crashers, you want to leave some wiggle room in a budget, though not so much that you’re tempted to spend without reason. You can always fix it up the next month if it isn’t working for you, but make sure your budget goals are doable.
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