4 Scary Things That Can Happen When You Don’t Budget (4 Video Links)
Nothing wrong with having fun…
Although we owe it to ourselves to enjoy our lives wherever we can, we must also acknowledge our responsibilities.
Whether we work full time or part time, run our own businesses, or make a living as a freelancer, when we’re riding high financially, it can seem as though we’ll be living the high life forever.
A good paycheck, a healthy bonus, or a closed deal with a lucrative client can be intoxicating. They can tempt us to treat ourselves, live a little, splurge. and throw financial caution to the wind.
But pause and think first
Although many households budget in lean times, it’s important to remember that budgeting is only ever really effective when it’s done every month and year. If we fail to budget, however, it can result in some pretty scary consequences…
Contents
Can You Save?
Saving is a great way of insulating yourself and your household from financial risk. It can prevent you from having to face any unpleasant financial surprises and avoid burying yourself in debt.
A big part of effective saving is choosing the right savings account, so that you can grow your wealth over time, so choose for an online account. As online banking is less expensive and simple to access, you can set up an automated transfer from your checking to your savings account.
If you don’t have a budget in place, however, savings is unlikely to be a real priority for you.
Controlling Debt
Lots of households carry some level of debt– whether it’s student debt, credit card debt, loan repayments or simply your mortgage. There’s no shame in debt, but failing to manage it properly can cause it to spiral out of control.
Effective budgeting allows you to calculate optimum repayments, so that your debts are paid down quickly, and you can reduce your interest costs. Consolidating your debts with a debt consolidation loan can make it much easier to budget, and will help your credit rating, too.
Debt Risk
If you allow your debts to spiral out of control, it becomes much harder to manage high-priority debts (like your mortgage) and lower priority debts (like credit card repayments). All your debts must be paid, but you need to think of your debts in some order of priority.
When this happens, you may find yourself unable to meet your commitments to your mortgage lender and may even end up in foreclosure. If this happens a real estate lawyer will be an extremely valuable resource. Prevention, however, is always the best cure.
Unexpected Costs
Finally, if you don’t budget every month, you’ll be far less able to manage the all of the expenses that run through your bank account each month. When this happens, you don’t know a “good month” from a “bad month” in terms of your spending, and you’re unable to scrape together an emergency fund.
An unexpected payment, like a car repair bill or the cost of replacing a broken appliance, can be disruptive, and leave you with no alternative but to get yourself deeper in debt.
It is always best to budget for life events such as weddings and funerals. Not a lot of people know this but there is something called final expense insurance and it is used to pay for funerals so your family doesn’t have to. Take a look at different providers to find the best one for you.
Start Now
A household budget is a tremendously helpful tool in navigating your way to financial freedom. Start this month- you can do it.
This post is for educational purposes only.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
(email) ken@stltest.net
(website and blog) https://www.accountingaccidentally.com/
(you tube channel) kenboydstl
Image: Bullseye, Jeff Turner CC by 2.0