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The Importance of Budgeting

Why should I budget?
- A budget is like a map: it tells you where you are, where you’re going, and what you need to do to get there.
- The better you plan your finances today, the less likely that you’ll encounter problems down the road.
- Having a budget makes it easier to make decisions related to finances; for example, should I buy a new car now, or should I wait until next year?
- A budget also gives you a yardstick against which you can measure your progress toward reaching your goals.

 Aren’t budgets complicated?
- All you need to do is set up a way to estimate your income and expenses, and then compare what you actually receive and spend with what you’ve estimated.
- You can simply write your budget with pencil and paper, or you can use a software package like Quicken to simplify the task.
- When preparing your budget, be honest with yourself; if you typically eat out three nights a week, putting $20 for total weekly meal expenses is unrealistic. 

How much should I plan in each area?
- On average, Americans spend 32.9% of income on housing, 13.1% on food and dining, 19.1% on vehicle costs and other transportation, 5.9% on healthcare, and 9.9% on insurance, Social Security and other pensions. (Source: Bureau of Labor Statistics)
- However, everyone’s situation and needs are different.- Track all of your expenses for three months to better understand where your money goes.
- Remember that expenses such as heating costs will vary throughout the year.
- If any of your categories are dramatically higher than those averages, you may want to re-think your spending habits. 

Is it okay if my budget doesn’t match my spending exactly?
- Generally, yes, because a budget is only an estimate of what you expect.
- In fact, most experts recommend that you underestimate your income slightly, and overestimate your expenses.
- If the actual numbers for items are considerably different from what you budgeted, you may want to consider adjusting your budget accordingly. 

Do budget needs change over time?
- Just as your life changes with each passing year, your budget is likely to change to reflect changes in your earnings and your expenses.
- It’s a good idea to review your budget at least annually to ensure that the amounts are realistic and that they reflect your plans for the coming months.
- Keep your children’s ages in mind as you plan, because school and other activities will affect the amount you’ll need to spend.
- If you receive a raise at work, you should add it to your budget, but rather than increase spending to match it, consider saving or investing the additional amount.

Posted: 12/21/2011 with 0 comments

Categories: Budgeting, Finances

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FORUM Credit Union in Indianapolis, Indiana is federally insured by the NCUAFORUM Credit Union in Indianapolis, Indiana is an Equal Housing Opportunity lender
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