A lot of people understand that they need to have a budget plan. You get to organize your finances, control your expenses and so much more. However, you will find that not everyone is actually successful in implementing it.
Once you decide that you want to make a budget, you will find a lot of self help information that will assist you in creating one. But finding the instructions is not the problem. You will find that the challenge is in creating a budget you can stick to.
There are people who have gone through the process of creating a budget but it usually does not last. They start out with all the enthusiasm that they can muster and then after a few months, they just give up. They stop following the budget.
Facts about the household budget of the average consumer
But what exactly is the average American’s behavior when it comes to budgeting? Let us review one study from the National Association of Personal Financial Advisors (NAPFA) and an infographic from Mint to help identify the financial habits of consumers – especially when it comes to budgeting.
In 2012, NAPFA released a file through NAPFA.org to explain the importance of financial planning in our society. They compiled a couple of statistics that will shed light to how important a budget plan is to the average household. Here are the important findings in this publication:
56% of consumers do not have a budget
40% are saving less in 2011
39% do not have retirement savings
39% have credit card debt every month
31.4% of mortgage loans are behind on payments
23% are not comfortable with their retirement
37% of workers do not expect to retire when they reach 65 years
So what does this tell us about the average American consumer? First of all, it simply means people have a lot to change about their personal finances. They need to improve their savings and they need to start working on their retirement fund. Not only that, they have to work on their debts too. All of these are improvements that can be helped if consumers start implementing a budget plan that they can follow. But as the data reveals, more than 50% do not have a budget in place.
In an infographic published on Mint.com, they mentioned that a budget plan is one of the fundamental steps in proper financial management. Their data revealed 4 different budget tasks for the average household.
32% create a detailed monthly tracker of their income and expenses. 39% of these households earn $75,000 or more, 30% earn between $30,000 to $75,000 and 32% earn $30,000 or less.
30% outline long-term financial goals (saving and investments). 38% of these households had some college education while 20% only got through high school or less.
32% use a computed software for money management. 17% of these households got a high school education or less while 44% had at least some higher education.
24% hire a professional to help with their finances. Of these households, 35% are earning $75,000 or more, 23% are earning $30,000 to $74,999 and 10% are earning $30,000 and less.
What these data tells us is that the higher the education, the more they will seriously implement a budget plan in their personal finances. The same is true with their income. The higher the income, the more that they feel the need to budget their money. This supports a common notion that if you do not earn a lot, you do not require budgeting. But any financial expert will tell you that this is not the right mindset. Regardless of the amount of money that you earn, you have to incorporate a budget plan to make sure that your financial priorities will be met (e.g. retirement, savings and debt payments).
5 ways to view budgeting to convince yourself to stick to it
But then again, we have yet to deal with the problem about sticking to your budget. When you look at a budget plan with a purpose in mind, you will find that budgeting is not as tedious as you think. With that, here are 5 different purposes that you can use to change your views about a budget plan.
View it as your financial cheat sheet when making decisions.
A benefit of budgeting is it allows you to make smart decisions about your personal finances. Since it gives you a general picture of your money, it will help you understand your current financial capabilities. The ease by which your budget will allow you to look at your account will make it a valuable tool. It can prove to be useful especially when you are trying to decide on an important purchase – like a home or a car. Anything that is big and expensive has to be given a lot of thought. Your budget plan can give you immediate information when you need it.
View it as your personal economic indicator.
A budget can help you get an overview of your finances at a glance. It holds the two important aspects of your money: your income and expenses. Being an economic indicator, it will tell you if your finances need improvement or not. You can see if your income needs to be increased or your expenses need trimming. It will help you forecast some of your future financial moves so that you can grow your money.
View it as a tool to prevent a crisis.
One of the important effects of a budget plan is it will warn you of a potential financial crisis. If you see that your expenses is always higher than your income, you know that if it goes on, it can lead to accumulated debt. Since your budget can warn you about it, you will naturally want to look at your budget as often as you can. Once you spot a potential downward trend, you can do something about it before it is too late.
View it as a tracking tool for your financial goals.
Another purpose for your budget plan is as a tracking device. As it helps you identify the financial goals that you need to reach, it also helps you view the progress of your efforts. That will prove to be useful when you are trying to see how far you have come. It will help you strategize to see if you needs to improve your plans or leave it be because it is working just fine.
View it as a way to involve your family in financial discussions.
Lastly, your budget can be a good starting point to get your family involved in the finances. You can prepare a household budget worksheet together so everyone can view the current financial situation at home. It will give your kids an idea about how you fare in terms of your income and expenses. You can also benefit from distributing the financial burden. For instance, if you need to cut back on expenses to reach a financial goal, you can use your budget to point out where each of the family can save on costs.
These are the five new ways that you can view a budget plan so you will be more motivated to follow through with them. Remember that no matter how great your plan is, if you cannot follow it, that tool will be useless. Since you know how important this is in your money management efforts, you should do your best to ensure that you can complete it.