Houston, you may have a money problem and need a budget to get your personal finances back to Earth safely. The painful truth that many Americans sometimes learn the hard way is that failure to plan how their earnings are distributed has serious financial consequences.
Without well-reasoned budgeting, you are essentially flying by the seat of your pants. In order to build a healthy FICO score and gain access to low-rate auto loans and a mortgage, you need a budget to keep your finances on track. If you haven’t already crafted a monthly budget, you’re likely feeling some discomfort.
7 Signs You Need a Budget
It’s not uncommon for gainfully employed community members to struggle even though their take-home pay should cover all their monthly expenses. When this happens, we sometimes shrug it off as a byproduct of inflation or think that a few overtime hours will remedy the situation. Those things may or may not be true. But if you’re experiencing any of the following signs, it’s entirely possible smart budgeting could right your financial ship.
1. You Are Late with Bill Payments
According to a report by National Energy Assistance Directors Association, 1 out of every 6 households fell behind on utility bills in August 2022. That equals more than 20 million families. While higher energy costs may have taken people by surprise, effective budgeting could have helped avoid making late payments and the charges that get added. That’s because forward-thinking budgeting includes enough wiggle room to handle unexpected increases.
2. Your Overall Debt Balances are Increasing
Paying monthly minimums and rolling over high-interest credit card balances is like sinking in quicksand. Along with racking up interest, cash-strapped consumers find themselves charging monthly necessities. It’s crucial to map out monthly expenditures and carefully evaluate each line item. Seeing where resources are going allows you to make informed decisions about cuts. Securing a low-interest credit card and transferring balances is also a good way to reduce expenditures.
3. You Don’t Manage to Save (Even a Little)
A surprising number of families are tenuously living paycheck-to-paycheck. The inability to save even a few extra dollars each month means they are treading water. Once credit card balances tick up or an unexpected setback occurs, people just squeaking by each month are likely to drown in personal debt.
Equifax, one of the three major credit bureaus, published a piece to encourage people to take proactive steps to stop living from one paycheck to the next and start saving money. The credit reporting institution suggests opening a separate savings account, refinancing high-interest debt, and renegotiating your bills. But Equifax points out that you need a budget to start saving money and improve your financial health.
Enjoy our budgeting and money-saving tips to maximize your budget by downloading our free guide:
4. You Don’t Have an Emergency Fund
The future will always be uncertain, and the importance of having a rainy day fund in an emergency cannot be understated. A debilitating health condition or injury could sideline you from work. Unexpected expenses, such as needing a new automobile or fixing a leaking roof, could prove problematic. Then there are the positive life events that require cash on hand, like paying for a wedding. Without an emergency fund to cover these costs, you may need to take out a loan.
5. You are Surprised by Your Monthly Bill Amounts
Being surprised by increases in monthly bills is often accompanied by feelings of stress and anxiety. The fact you are taken aback usually means your monthly income is already being stretched thin. A good budgeting practice to consider is including a 5 to 10 percent buffer on monthly bills. When they eventually go up, you won’t feel as anxious because the revenue to pay them is already in your budget.
6. You Are Not Sticking to It
The adage that you can lead a horse to water, but you can’t make it drink applies to human behavior and budgeting. Creating a budget only helps pay monthly expenses and build up savings if you stick to it. Undisciplined spending generally leads to reduced savings and rising credit card debt. If you have a budget and are feeling a financial pinch, it may be prudent to circle back and start following it.
7. You Haven’t Adjusted Your Budget
It’s important to understand the inflationary strain on working families does not magically disappear. The shocking recent gasoline prices and groceries spikes have consumers adjusting their spending habits. In terms of budgeting, the cost of goods and materials often rises a little each year.
Before the pandemic, the U.S. inflation rate for 2018 was 2.44 percent, a 0.31 percent increase from 2017. The cost of goods, services, utilities, and groceries typically rises by a modest amount. That’s why smart budgeting accounts for even normal inflation.
Manage Your Budget with Help from CCCU
Make the most of your budget with a Peak Checking Account. Our high-yield checking account could grow your funds faster and help you budget smarter! We also recommend opening separate Savings Accounts for your emergency fund and other savings to keep better track of your finances. If you have any questions about how CCCU can help with your budgeting and saving goals, contact us today.