A budget may be a relatively simple concept, but millions of Americans fail to make the grade. The Bankrate July Financial Security Index indicates that 60% of Americans use a budget to manage their finances, but 38% give up on a budget before they even try. And that number increased from 58% last year.
In some ways, a budget is a bit like therapy, you have to dig out the real problem before you can make progress toward a solution. Ditching the denial and honestly tracking your spending habits – the good and bad, acknowledging your debt and savings are among the first steps to financial health.
Nothing forces you to budget like a major life change, a health crisis, marital status change or the addition of children to the family, the Bankrate survey indicates. In the survey, parents were much more likely than nonparents to stay true to a budget, with 70% of parents versus 57% of nonparents comparing their spending to a budget plan.
Bankrate recommends beginning by tracking your spending for at least a month, pick out areas where you can trim the fat, and have that amount automatically transferred from your paycheck into savings. Savings should be seen as untouchable to some extent. Automatic savings transfers don’t do a bit of good if you just transfer it right back to your checking account when money gets tight at the end of the month.
Bankrate warns that even as you find places to cut back spending, everyone needs a little wiggle room. If your budget is based on deprivation, you are far less likely to stick to your budget if it’s not an accurate reflection of your lifestyle.