Why is Using a Budget Beneficial? How Budgeting Changed My Thoughts on Money.

Have you heard or seen the word budget and instantly became turned off? Is it hard to even fathom the idea of being on a budget? I understand, I’ve been there, and at some point in time you thought, there is no way I can budget!

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Although the word “budget” is oftentimes synonymous with restriction, I can assure you that is not the case. I have learned from personal experience that budgeting is the most beneficial way to be accountable for your money, improve your finances, and financial mindset. Budgeting was the foundation of my success through my debt free journey. Having paid off six figures of debt, I know it would not have been possible without budgeting and taking the blinders off to the actual mess that I was in.

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According to a 2023 survey conducted by NerdWallet, “Most Americans overspend, and many use credit cards to cover it. The survey found that 83% of Americans say they overspend, and a similar proportion who have a monthly budget (84%) say they exceed it. Of those who’ve ever gone over their monthly budget, 44% say they usually use a credit card to pay for the additional purchases they make when going over budget.” I was one of those people using a credit card to cover additional expenses and it was just the way of life for me.

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I got my first credit card at 18, and I was fixated on building my credit. Although I had an almost perfect credit score, I was heavily dependent on credit. I had no freedom from those cards, I was beholden, and it was awful. They dictated a lot of the decisions I made over the years because I owed so much money. There were a lot of opportunities that passed me by because of my financial situation and lack of financial literacy.

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Why Budget?

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Budgeting is not only beneficial for your personal finances. It impacts you in so
many ways, even when you think it doesn’t. Have you dreamed about a sabbatical? Traveling internationally for a year? Pursuing your dream career or going back to school, but you simply can’t? Maybe your financial situation is holding you back from living the life you want. I’ve been there and I can tell you it deeply impacted my quality of life. Independence and financial stability is what pushed me to get my money in order, but I didn’t start out that way. I believe that budgeting is akin to a financial reset. You are starting a fresh, clean slate and preparing to crush every single money goal you’re chasing after.

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Think about it this way…

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• Saving for a house? Budget.

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• New car? Budget.

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• Bucket list trip? Budget.

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• Clearing up debt? Budget.

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• Emergency Fund? Budget.

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Choosing a budgeting format that works for you allows you the opportunity to take a deep dive into your finances. Do you really know what is going on, or are you going with the flow? With a budget, you can take stock of your total debt balance, income, and outgoing expenses. I know it’s hard! Like me, you may be guilty of feeling overwhelmed when it comes to money and the thought of reviewing bank statements, bills, and receipts feels like such a burden. You’d be surprised once you start putting all the pieces of the puzzle together, it’s not as bad as you think. The hardest part is making the decision to start, but once you get started, you will feel so much better!

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When I was deeply in debt, I was barely keeping my head above water. I was living paycheck-to-check, and I thought, as long as I pay the minimum on everything, I’m good. I was the epitome of, “borrowing from Peter to pay Paul.” I couldn’t even think about budgeting because I was so broke. When I made the decision to finally get out of debt, I sat down with someone to review my bank statements. A second set of eyes can’t hurt, right? Clearly, I have no money! All the money I said I didn’t have was being spent frivolously. My income was a problem, but my poor spending habits heightened the problem, and it was the cause of my stress and perpetually keeping me shackled.
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Starting the Budget

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When it was time to get down to business and budget, I had no idea where to start, but I knew it couldn’t be worse than the financial state I was in. I decided to simplify my finances by streamlining everything. I began by accounting for all of my monthly expenses: housing, car, utilities, groceries, weekly discretionary spending, and debt.

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From there, I used my monthly income and deducted my expenses. If there was any money left over, I applied it to my debt using the debt snowball method. I periodically checked in with my insurance companies, internet, and cell phone service provider to see where I could get a discount or cut expenses. Nothing was off the table.

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Living Life on a Budget

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When I started budgeting and paying off debt, I still thought, there is no way I can do anything if I have this big financial goal. My life during my debt free journey was quite the opposite. For the first time in my adult life, I started feeling confident about my money. I was saving, investing, and aggressively paying off debt. Most importantly, I became financially responsible, while still living my life. Something I never thought was possible without carrying the guilt and shame associated with spending money when you’re in debt. I traveled extensively, went to live shows and events, practiced self-care, and met my debt-free goal in advance of the timeline I set for myself!

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How Budgeting Changed My Mindset

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When I was gaining momentum and started making traction on my debt, I realized just how important budgeting is and the value of giving every dollar a place to go. It was not some burdensome task that outlined everything I could not do. The benefits of budgeting didn't start at just decreasing my debt, but my life was positively impacted. It trickled into other areas of my life pushing me to go hard at all the things that I wanted. I was moving differently, and making decisions wisely rather than being dictated by what I could and could not do due to my financial situation. The financial stress and dread I felt about money, or lack thereof, and debt slowly faded. I didn’t live in a constant state of panic thinking about how I had to stretch my money and I wasn’t leaning on credit cards to fill in the gaps. I had money not only to cover my basic expenses, but to pay off debt, enjoy life, and travel. I genuinely attained financial peace.

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If you are struggling and don’t think debt freedom is attainable, I am here to tell you, you can do it!

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Conclusion

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As cliché as it may sound, budgeting is what helped me turn things around in my life, and reach my financial goals, including becoming debt free. It was a mindset change. I made every excuse as to why I couldn’t budget, why I was broke, and how things just weren’t falling into place for me financially. Don’t get me wrong, my income was definitely part of the problem, but my actions and lack of accountability contributed to an already compounding issue.

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I have no tangible items to match the amount of credit card debt I had. I couldn’t even tell you what I bought! One thing is for sure, life will throw financial curveballs at you and you want to be ready when they come. If you have a budget, or want to learn how to budget, don’t forget to save money for an emergency fund. Oftentimes the catalyst to the financial mess is an emergency you were not prepared for.

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If you are stuck and don’t know where to start, take a deep breath, and research your options. The first step is deciding you’re ready to make a change. Everyone’s financial situation is different and you’d be surprised at how the small steps you take now can make a world of a difference.

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Feeling stuck and utterly overwhelmed by the current state of your financial situation? If so, please feel free to try MyBudgetCoach with our free 35-day trial. When I say free, I mean it! There are no strings attached! You will have access to me as your virtual coach. Once you get started, you can book a free call with me to talk about all things related to your money. I look forward to chatting with you soon!

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Source: "Most Americans Have a Monthly Budget, but Many Still Overspend." https://www.nerdwallet.com/article/finance/data-2023-budgeting-report