We work hard to earn a living. We should make sure we spend the money we bring home wisely. That’s where a household budget comes in. It’s a good tool to see at a glance what we have coming in, what’s going out (and what that money is paying for) and if there’s anything left at the end of the month to put into savings.
Before we dive into exactly what a budget can do for us, let’s consider for a minute what will happen if we’re not tracking income and expenses. We may end up spending more than we’re making in a given month (or two, or three). Over time that can put us into some pretty hot water financially. We may also spend a lot more than we’d like to believe in things like eating out, going to the movies or new clothes.
Having a budget gives us more control over where we want to really spend our hard-earned cash. Maybe that’s dinner and a movie, but maybe it isn’t. Wouldn’t it be nice to have an actual choice?
Reasons Why You Need a Household Budget
It Tracks Where Your Money Is Going
A budget simply tracks your money, but I think a lot of people are surprised by what they find once they actually start doing it. You record where your money comes from each month, whether that’s your regular paycheck, side hustle income, child support, or anything else coming into the household. Then you write out everything going back out, starting with your regular monthly bills like your mortgage or rent, car payment, utilities, insurance, groceries, and other necessities.
Once those bills are accounted for, what you have left is your discretionary income. That’s the money you have more control over.
And THIS is where budgeting can get interesting.
It’s incredibly easy to feel like your paycheck simply disappears every month when you’re not actually tracking it. You know you paid the bills. You bought groceries. You filled up the car. But somehow you’re looking at your bank account a week before payday wondering, “Where in the world did all my money go?”
A budget gives you the answer.
It doesn’t necessarily mean you’re doing anything wrong. Sometimes the reality is simply that your necessary expenses have gotten too high for your current income. But you can’t make good decisions about something you aren’t actually looking at.
Helps You Identify Things You Waste Money On
Having everything in front of you in black and white can be a HUGE eye-opener because it helps you see where you’re spending money without really thinking about it.
Maybe you’re paying well over $200 a month for cable TV when your family spends most of its time watching streaming services anyway. Maybe that $150 cell phone plan made sense three years ago, but there are cheaper options available now. And how many subscriptions are quietly coming out of your account every month that you’ve completely forgotten about?
It’s usually not ONE $500 purchase wrecking the budget. Sometimes it’s $9.99 here, $17.99 there, another $25 somewhere else, and suddenly you’ve got a couple hundred dollars disappearing every month.
Go through your expenses and ask yourself a simple question:
Is this REALLY how I want to spend the money I’m working so hard to earn?
That doesn’t mean you have to cut out everything fun either. I don’t believe a realistic budget should make you miserable. If getting coffee once a week makes you happy and you can afford it, put the coffee in the budget! 😂 The point isn’t to feel guilty every time you spend money. It’s to make sure you’re spending it on the things that actually matter to you instead of losing it to things you don’t even care about anymore.
Allows You To Be Proactive About Savings
Saving money without a budget can be HARD.
We go into the month with the best intentions. We tell ourselves, “Whatever is left at the end of the month, I’ll put into savings.”
Then the end of the month gets here and… what money? 😂
A budget lets you flip that around.
Instead of saving whatever happens to be left, decide ahead of time how much you’re going to save and make it part of the budget. Maybe you can’t afford to save hundreds of dollars right now. That’s okay. Start with $20 if that’s what your budget allows.
Treat savings like one of your regular bills.
You can also break your savings into different goals. You might have an emergency fund, Christmas fund, vacation savings, car repair fund, or money you’re setting aside toward a bigger dream. When those expenses eventually show up, you’re much less likely to have to reach for a credit card because you’ve already been preparing for them.
If you’re tempted to spend whatever you see sitting in your checking account, opening a separate savings account can help too. Sometimes having the money a little harder to reach is enough to keep us from convincing ourselves that we “need” something we really don’t. 😂
Helps You Prepare for Expenses That Aren’t Monthly
One thing that can completely throw off a household budget is forgetting about expenses that don’t happen every single month.
Christmas comes every December. Birthdays happen every year. Cars eventually need tires. School expenses pop up. Annual subscriptions renew. Property taxes and insurance premiums come due.
None of these expenses are really surprises, but they can certainly FEEL like surprises when we haven’t planned for them.
Look at your entire year instead of only looking at this month. If you know you’ll need $600 for a particular expense six months from now, setting aside $100 a month is a lot easier than suddenly trying to find $600 when the bill arrives.
Ensures You’re Not Spending More Than You’re Making
Most importantly, your budget helps you see whether you’re spending more money than you’re actually bringing in.
That’s not always a comfortable number to look at, especially when money is already tight. But avoiding the numbers doesn’t change them.
If your expenses are consistently higher than your income, the budget gives you somewhere to START. You can see what can be reduced, what can be eliminated, whether certain bills can be renegotiated, and whether you need to find a way to bring additional income into the household.
And sometimes that’s an important distinction. You can only cut expenses so far. There comes a point when you’ve cut everything reasonable and the real problem isn’t overspending anymore. You simply need more income.
Knowing which problem you’re actually dealing with makes a huge difference.
A Budget Isn’t About Never Spending Money
I think this is one of the biggest misconceptions about budgeting.
Having a budget doesn’t mean you can never go out to eat, buy a book, take a vacation, spoil your kids, or spend money on something simply because you WANT it.
A budget is actually what can give you permission to do those things without wondering afterward if you just spent the electric bill money. 😂
You’re telling your money where you want it to go based on what’s important to your family right now. And those priorities are going to change. A budget that worked perfectly for your family two years ago may make absolutely NO sense today.
That’s why a budget isn’t something you create once and forget about. Look at it regularly, adjust it when life changes, and make sure your money is still going toward the things that matter most to you.
How has having a budget helped your family keep your expenses in check? And if you don’t currently use one, what’s the biggest thing that keeps you from starting?
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I write down my expenses from time to time, but I think this should be done on an ongoing basis! Thank you, your post is inspiring!
It’s so easy to just push this task aside, but when we are forced to do it it does help us to truly see where the money is going.
Thank you for stopping by and commenting. I hope to see you again soon.
Good post! Each time I’ve drawn a budget, I’ve been surprised at how much I earned but more so at how much I wasted. Time to remedy that!
I feel the same way. It’s so easy to waste money without realizing it.
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This is such a good idea. When you see where your money is going, you might decide you don’t want to be spending so much on some things and save it instead.
So smart an essential to do this so you can see where you can save and cut expenses