You've likely heard our story at this point. But, if you haven't here's the 15 second version: My husband and I spent the first 26 months of our marriage paying off just under $97,000 of consumer debt during which time we had an annual household income of about $40,000-$65,000.
Having accomplished such a "feat," you can imagine that we are often asked how we did it. (I must explain...I gave "feat" air quotes because, although it was a lot of debt, we really didn't do anything special. We just decided we were done being in debt and we went after that debt with intense focus, hard work, and determination.)
But, back to that question...how did we do it?
My response is always the same.
First and FOREMOST, we had a budget. We simply could NOT have accomplished this "feat" without a budget.
Secondary to budgeting, we cut our costs (so much so that we were living on just 15 percent of our income), increased our income, stayed super focused on our debt free goal, made many sacrifices along the way, and ignored society's messages that we should act otherwise.
Are you up to your eyeballs in debt like we were? Do you have a house full of kids for whom your hoping to provide some college funding? Do you want to retire by the age of 67? Well, then I ask you, do you have a budget?
No matter your income, no matter your financial goals, you need a budget and here's why...
Having a budget means that you have a plan.
When you make a budget, YOU get to decide where your money goes. You get to decide to fund your retirement. You get to decide to cash flow your dream vacation. You get to decide to pay off another student loan. You get to decide to eat out (or not) this month.
Are you getting the picture? A budget puts YOU in control. A budget is a plan...a plan that accounts for every penny. Every...single...penny. When you have a plan, it means that you're being intentional with your money, rather than just spending it "willy nilly" (like my mother would say). When you have a plan and you're being intentional with your finances, you're much more likely to actually accomplish your financial goals (i.e. a fully funded retirement account, a dream vacation, etc.).
You will likely spend less and save more.
When you make a budget, you become keenly aware of every penny that's coming in and every penny that's going out. When you become so aware of your cash flow, it's easy to identify unnecessary, or excessive, spending. Research has shown that people who budget tend to spend less and save more.
A budget gives you peace of mind - it reduces financial stress.
When you don't have a budget and instead just spend "willy nilly," hoping that your money will last until the end of the month, it creates a lot of stress and tension. Have you ever been worried about being able to pay your bills that come later in the month? Have you ever asked someone to hold a check for a few days because your bank account is empty? Have you ever forgotten about an upcoming expense and not had the money to cover it? These are the sort of "emergencies" that cause financial stress and tension. (I say "emergencies" with air quotes because, in reality these shouldn't be emergencies and these WON'T be emergencies when you're navigating life with a budget.)
When you quit trying to live without a budget and decide to make a plan for your finances instead, you take ownership of your cash flow. You are suddenly in control of all the cash flowing in and out of your life. When you make a plan and account for all of your monthly expenses, then you don't have the stress of worrying about whether or not your money will make it to the end of the month.
Let me take a minute to be honest...financial stress sucks and it can take a huge toll on your relationships. Did you know that the number two reason for divorce is money problems? The financial stress and tension that comes when we attempt to ignore our finances (and navigate life without a budget) destroys marriages. If you and your spouse are struggling to communicate about and/or work together on your finances, I highly recommend that you schedule a financial coaching session today.
Your dreams become reality.
We all have dreams. Some people dream of taking their kids to Disney World. Some people dream of sponsoring a child in a third world country. Some people dream of retiring at the age of 55. Some people dream of laying on a beach somewhere. I want to encourage you to take time to dream.
((Pause here and ACTUALLY take a few minutes to dream.))
Do you have those dreams in mind? Good. Well, now let me be blunt...those dreams are not going to happen without some planning and hard work. A budget is the plan that you need to afford these dreams. When you're putting together your budget, be sure to build these dreams right into your budget. Include a line item (or two or three) for your dreams - whether that be Disney World, retirement, or both! Planning for those dreams and intentionally saving in your budget will turn your dreams into reality.
So, what if you're reading this post and you don't have a budget and really have no idea where to start? That's ok! We've been there. (We had to start somewhere too.) Let me provide you with a few resources to get you started...
(1) Send me an email. Simply write 'budget template' in the subject and I will reply with a PDF file of the budgeting template we used to get started.
(2) Watch this video. It will cover the basics of putting together a budget and dumping debt. If you're dealing with debt and trying to figure out how to get it paid off as quickly as possible, I also encourage you to check out the article, 6 Steps to Ditching Your Debt, from the HiCharlie blog.
(3) Once you have a budgeting template and you've watched the video above, get a budget put together ASAP!! The longer you go throughout the month without a budget, the more "willy nilly" (crazy, unnecessary) spending there will be.
(4) If you are still having trouble putting together your budget, you aren't happy with your budget, or you want help making a plan to achieve your financial goals, then send me an email or sign up for a financial coaching session.
Making a budget and sticking to your budget is the most important step that you can take for your finances. Without a budget, you are navigating life without a plan for your finances. It's like driving to a place you've never been before without a map or a GPS. So, please, take time ASAP to sit down (with your spouse, if you're married) and get a budget in place.