Think a budget is something only anal people use to track their pennies? Think again! It’s an essential financial tool regardless of your personality type. Still not convinced? Here are five signs you desperately need a budget.
1. You don’t know where your money is going
You know your money is going somewhere—after all, each paycheck disappears almost as soon as you deposit it — but you can’t say for certain where you’re spending each dollar. All you know is that your wallet is chronically empty, and your debit and credit cards are starting to wear down from heavy use. Unfortunately, you have nothing to show for all your spending.
2. You live paycheck to paycheck
Have you ever had to wait for a payday before you could take your car in for repairs? Have you ever had to delay buying groceries until you could deposit your paycheck? Have you ever relied on a payday loan, so you could buy essential medication? If the answer to any of these questions is yes, then count yourself amongst nearly half of all Americans who live paycheck to paycheck.
3. You’re afraid to look at your bank account and bills
Averting your eyes from your bank account balance won’t change the fact that you’re dangerously low on cash, nor will avoiding bills from utility providers and credit card companies disappear what you owe. You know that. You only do it because you know you won’t like what you see: too little put away in savings and far too much owed to debtors.
4. You rely on credit cards to avoid over-drafting
If you aren’t sure how much you have in your checking account — or you do, and you know it’s not enough — then your next line of defence is using a credit card to pay for emergencies. In a way, it’s helpful because this saves you from an overdraft fee if you don’t have any overdraft protection.
But it’s mostly harmful, as you’re now indebted to the credit card company, and they apply interest to what you owe. Depending on the account’s APR, it can add up quickly. Eventually, you can pay more in interest than on the advance itself.
5. You don’t have any savings
At first, being unprepared for each of life’s little SNAFUs may feel like a minor inconvenience when you don’t have a nest egg or emergency fund set aside. These short term financial goals are relatively easy to fix. Online direct lenders like MoneyKey have simplified what used to be a complicated borrowing experience by offering quick and easy online cash loans. You can use MoneyKey installment loans for when simple things test your finances, like when your worn drive belt needs to be replaced by your mechanic.
When it comes to long term financial goals, your lack of savings evolves past inconvenient. It can limit your future. Without a considerable nest egg, you won’t be able to make life’s biggest purchases, like buying a home or going on vacation. Without specialized savings like a 401K or investments, you won’t be able to be able to retire. At a time when fewer people have pensions and considerable savings, plenty of people must continue working even as a senior.
How do you grade?
Working until your final days is a grim prediction, but it may be your reality if you ignore the signs. If one or more of these signs describes your current financial situation, you need to make some changes to your money management style. A budget is an essential financial tool that can help you fix your financial mistakes, so you can expect to retire before your dying breath. It may take some time and hard work, but don’t let that discourage you. When done right, budgeting is worth it all.