Among the resolutions bent toward healthy eating and exercise, many began this year with commitments to better financial management. More specifically, saving money was among the top three pledges for 2018. However, like its cohorts, making money changes can be an uphill battle for plenty of people.
We know we should save. We should live beneath our means, spend less than we earn. We should put structure around our financial affairs. Sadly, most of us do not.
One reason is that we weren’t taught how to do properly manage our finances. How many can say that they had financial literacy training on their academic journey? Much of what we learned came from observing those around us, our parents and extended family or community. And we learned by figuring it out on our own.
The extent of the money conversations that I heard growing up was oddly about the checkbook. Just the checkbook. I knew that the checkbook had some connection with the bank accounts. I didn’t really know how it all worked. And I didn’t ask. I observed. My mother seemed unwavering in her faithfulness to balancing the checkbook. So, in my mind, that was all there was to money management.
When I began earning money for myself, I didn’t have comprehensive answers to money questions…that, frankly, I didn’t know needed to be asked. Why does the government take a portion of my earnings? How do I handle credit responsibly? What is the difference between an IRA and 401(K)? How much and why should I save? What is a budget?
Soon after my debacle with credit cards in my early 20s, I began working at a bank as a customer service representative. I was in graduate school with classes mostly at night. This was the perfect day job for a "people-lover," like me. I fielded calls from customers who did not account for their outflow and who were subject to the then new fees for insufficient funds in overdrawn accounts. I saw my own naïve choices play out in their stories. And I knew I had to learn a better way.
That path began slowly with learning how to create a budget.
For many, the word budget is a curse word. It evokes a range of emotions from distress to vexation. There is so much emotional clamor swirling around this topic that most people simply evade it all together. Gallup polls confirm that only 30% of Americans maintain a budget. Interestingly enough, the higher the middle-class income, the less likely one is to budget their resources. (That’s a can of worms to open at another time.)
Here are three risks increased by not having a budget.
Easier to Get into Debt
Without a plan for finances, most people spend liberally. One treat (a pair of cute shoes or new headphones) can easily turn into several splurges. Once you resort to employing credit cards to take up the shortfall, vowing to pay it off by the end of the X (you fill in the timeframe), it can become a downward spiral into a debt pit.
Surprise Expenses Lead to Discord
Free-spending could leave you unprepared for big-ticket items that pop up such as a car repair or unexpected travel to visit a sick family member. When unplanned events make large withdraws from your finances, stress and anxiety are inevitable. It is difficult to have peace with anyone, including yourself.
Difficult to Reach Your Goals
Think, hamster on a wheel. Got the image. Good. That’s what it feels like when you’re operating without a budget. You have specific goals you want to accomplish. But when you don’t have a plan for your money, you cannot prepare for and execute a goal-oriented plan of action. Your efforts become aimless. This can lead to emotional upheaval.
I don’t share these to scare you. I want to encourage you to take a moment and think about what you could be doing to yourself, to your family by not budgeting.
Yes, it’s tedious, at first. Ok. It’s just tedious. And yes, it’s another thing to add to your plate. Consider how your budget would allow you to enjoy what’s on your plate so much more.
A budget is about boundaries. Setting healthy boundaries around your money management to build a life that you love and enjoy. It is a basic commitment to yourself. That’s it.
Raise your hand if you are going to begin budgeting. Give yourself a pat on the back if you have a budget already. In the comments below, share one thing you will do this week to manage your money better. Now go out there and SLAY!
Until next time…