I don't think many people like making budgets. In fact, for some people, making a budget is probably just as fun as doing their taxes. The good news is that budgeting, even though it's not a lot of fun, is definitely worth it. It will help you save more money, pay off your debts, and, best of all, worry less about your money.
People usually don't budget because they think it's easy. How do you begin? How do I use the tools? What do I budget for? These are very common questions, and the easiest thing to do when you don't know the answers is to do nothing. Then they make the usual excuses, like "budgeting is too hard" or "I'll get to that later." Let me tell you that if you can get past the first few problems and learn how to budget, your money will be in better shape.
It would be a stretch to say that people don't know how much they spend until they know how much they spend. That might seem strange at first, but if you read it again and think about it, it makes sense.
How will you know where your money goes each time you get paid if you don't sit down and make a budget? Do you really know how much you're saving and, more importantly, if you're spending more than you earn? People today often spend more than they can afford because they have credit cards. The banks then charge high interest rates for the privilege of letting you go deeper and deeper into debt.
How many people get to the end of their pay period and just "hang out" until their next pay day? This is not a good way to live your life and will keep your finances in charge instead of you.
People who do well financially in life usually have a good handle on their money and know how to spend their hard-earned cash. People who can save tend to be able to pay off their mortgages faster, don't have a lot of credit card debt, have more money they can spend, and feel less stress.
What would it mean to you if you could cut the time it takes to pay off your mortgage by 5 years? Here are a couple of examples of how you can cut 5 years off the length of your mortgage and how much interest you'll save as a result:
Example 1
A $300,000 loan.
Interest rate 7.99 percent
25-year loan term
Payout $533 per week
Total interest payable $393,482
An extra $45 per week payment will cut the loan by 5 years.
$301,165 in interest is due on a loan for 20 years.
Interest saved $92,317
Example 2
$400,000 in loans
Interest rate 7.99 percent
25-year loan term
$711 is due every week.
Total interest payable $524,642
$60 per week extra payment will cut the loan by 5 years.
Interest on a $400,000 loan over 20 years is $401,554.
Interest saved $123,088
Example 3
$500,000 in loans
Interest rate 7.99 percent
25-year loan term
Each week, you pay $889.
Total interest payable $655,803
An extra weekly payment of $74 will cut the loan by 5 years.
$501,942 in interest is due on a loan for 20 years.
Interest saved $153,861
If you sat down and made a budget, I'm sure you could find a way to cut your spending on some things by $45 or $60 or $74 to make sure you cut your loan term by 5 years and saved $92,317 or $123,088 or $153,861 in interest.
You have to make an effort to save money every week. If you don't know where your money goes, you won't be able to cut back. Putting together a list of all your income and expenses can be scary and something you may not enjoy (it could mean you are living beyond your means!) But as you can see from the list of interest savings above, it is worth it.
If you're having trouble making a budget and need help, you can download an easy-to-use budget planner from www.easy-budgeting.com. The site also has tips and advice to help you make a budget.
Remember that making a budget is the first step to taking charge of your money.
