A recent poll on the National Foundation for Credit Counseling (NFCC) website revealed that 57 percent of respondents misunderstand the purpose of a budget, viewing it as a restriction on their spending, when in fact, just the opposite is true.
A budget actually provides the structure through which a person can be in charge of his or her spending, directing the dollars to their best use. Spending should be a reflection of a person's priorities, but without a plan, the priorities often get pushed aside in favor of the tyranny of the urgent.
The reluctance to construct a budget suggests that people may be afraid to face the financial facts, choosing instead to allow the most pressing need or want of the moment to make the decision for them. Instead, the NFCC reminds consumers that a spending plan includes the following benefits:
- Creates a thoughtful awareness of spending
- Relieves financial stress
- Increases financial security
- Helps structure a plan for the future
- Allows planning for large purchases
- Assists in meeting financial goals
- Frees up money to designate for savings
- Uncovers money available to invest
- Allows preparation for emergencies
- Avoids late payments through scheduling timely payments
- Finds hidden money for debt repayment
- Potentially raises the credit score
Instead of being restrictive, a budget often creates more money due to smart spending choices. If financial freedom is the goal, a spending plan is the tool that starts the process.
It's a shame that budgeting has a negative connotation. Everyone needs a spending plan, but when times are tough, a budget is even more critical. When every penny counts, it's important to count every penny.
The first step to being in charge of your money is to track spending for at least one month. To get started, the NFCC offers a free budget worksheet which is available at http://www.nfcc.org/FinancialEducation/monthlyincome.cfm.
For professional help creating a customized budget, reach out to a trained and NFCC certified financial professional at an NFCC Member Agency. To find the agency closest to you, call (800) 388-2227, or go online to www.DebtAdvice.org. For assistance in Español call (800) 682-9832.