The budgeting behavior of Americans still needs some work. Although it is apparent that we have learned our lesson, the implementation is not yet enough for us to feel at ease with the changes we have made. So far, we have done a good job when it came to surviving the Great Recession. However, given the massive fall that most of us went through, the effort is just falling short.
According to an article published on Credit Union Times (CUTimes.com), the latest Financial Literacy survey proves that Americans still need more financial education. This survey was conducted by the National Foundation for Credit Counseling and the data revealed that 61% of American adults do not have a personal budget. This is considered to be the biggest percentage in 6 years. With the growing household debt and the still fragile economy, you know that you need to get your personal finances in order.
If you want to manage your finances, you have to create a budget. This is when you need to determine if you already have the right budgeting behavior to help you accomplish this financial task.
How does America budget?
We found an article on CreditDonkey.com that showed 4 different behaviors of Americans when it comes to budgeting. The whole article combines several studies and data that will give you a picture of how we manage our money. Let us discuss them one by one.
Tracking and saving money
The most important budgeting behavior that you need to develop is tracking and saving money. In truth, this is the whole point of budgeting – to help you track where your money is going so you can save more of it for the future. But how does America fare when it comes to tracking and saving?
According to the article, there is a survey done on Gallup that revealed only 32% of US homes have a budget. That is a dismal percentage that we need to improve. Some surveys reveal that your ability to budget will depend on your educational attainment. 38% of those with college degrees have a budget while only 26% of high school graduates have a budget. Credit Donkey also conducted their own survey and it revealed that of the people who budgeted, only 70% actually looked at their spending once a week.
So what does this say about us? It simply indicates that a lot of us need to start budgeting because it can help us look at our spending and compare it with our income. A budget will help you determine if you are spending beyond your means – which brings us to the next part of the American budgeting behavior.
Using a budget will determine how you will spend your money. As mentioned, it will help you compare if your spending is within the capabilities of your income. According to the US Bureau of Labor Statistics, the average household with 2-3 members and 1-2 earners spent more than $51,000 a year. The biggest part of that spending is in housing expenses – which amounts to 33%. This is the average of course, but your budget will tell you which expense is eating up most of your income.
While the data revealed that the expenses of households change over time, it is important for you to note these changes. The only way that you can do so is by listing down the details of your financial activities through your budget.
Saving for the rainy day
This particular budgeting behavior is only applicable for those who do not have an emergency fund yet. Once you have your emergency fund set up, you can remove this from your budget. According to the Bureau of Economic Analysis, we only save 4.3% of our income each month in 2014. In the past, we save more than 10% of our income. But why is it that we find it harder to save more towards our rainy day fund?
It all comes down to this budgeting behavior. You need to have the determination to put aside more money to put in your savings. Your budget will allow you to shift your expenses so this will become possible. The more you have to save, the more you need to lower your expenses. This can be easily done through your budget plan.
Doing the numbers
The last and probably the most difficult budgeting behavior is knowing how to do the numbers. Some people find it too tedious to take care of the numbers involved in budgeting. But as much as we hate it, you have to go through with it. The good news is, you have a lot of tools before you to help you accomplish this.
In a survey done by Credit Donkey, it was revealed that 70.7% of consumers use their bank account’s site as a budgeting tool. 31.7% use a spreadsheet to monitor their budget. 20.8% use a checkbook while 29.2% use a mobile or computer software.
It is also revealed that people make long term financial plans when they want to grow their savings or invest. This probably is because it is difficult to come up with a big amount to save or invest. That is why people do it in installments.
These budgeting behaviors does not necessarily have to apply to you but at least you know that there is more than one way to create and manage your budget. Your methods will depend on your personality. The important thing is to come up with a plan to reach your financial goal. Because doing a budget plan is always associated with a goal because it serves as your roadmap.
Each of the budgeting behavior that we just discussed will do more than just help you reach your goal. It will also help you break bad spending habits.
Budgeting will help you live within your means
Breaking the bad financial habit is important because you want to live within your means. This is the whole point of budgeting – to help you ensure that your spending is within your income capabilities. So all of the budgeting behavior that you learned here is important because it will lead to your financial success.
Living within your means is easier said than done – especially when you are used to overspending. But with these four tips, you should be successful in making it happen.
- Keep an eye out for the small expenses. In most cases, it is the small expenses that add up. The dollar you overspend each day will amount to a lot when you total it for the month. Making small unnecessary expenses will eat up your budget and will leave no funds for the priority expenses.
- Make wise choices about your home. According to HousingWire.com, single-family homes in the country are getting bigger. When it gets bigger, it becomes more costly to build and maintain. You have to realize that although it is the norm, your home will not always be the biggest expense that you have to make. Live in a home that is just right for you. And if you have a home that is too big, rent out a portion of it. That you help you earn a little extra.
- Plan your meals and shopping errands. Food should never be compromised for the sake of saving but that does not mean you should not plan it. Take time to plan your meals for the week so you can buy produce in bulk and thus save more. It will also help you take advantage of leftovers. The same planning must be applied to all shopping errands.
- Use financial tools. Implementing any budgeting behavior is tough but only if you do things manually. There are financial tools that you research and use to help you be successful at budgeting. Learn to use them to your advantage.