Financial issues are among the top concerns that couples tend to argue about (sex, in-laws
and the kids are among some of the others). Couples frequently enter a marriage or long-
term relationship without ever discussing their attitudes and values about money. One
may have been raised in a family where money was seen as security and saving was an
important value. The other may have come from a home where money represented love
and spending freely was demonstration of that love. When a new relationship or marriage
is formed, finances and all it's implications need to be negotiated.
One useful tool in helping to resolve differences about how income is spent is the use of a
budget. Despite the perception that a budget will hem you in with your spending, it instead
actually provides greater financial freedom. Many people believe that using a budget is an
outdated, even archaic concept these days. With easy credit and credit lines, we are able
to purchase items whenever we want. Many may ask "Why do I need a budget?" "
Doesn’t using a budget prevent me from spending the way I want or need to?"
Over the past few decades, we as Americans have developed the dangerous habit of
buying on impulse, using credit cards, without considering the long-term consequence of
increasing debt. Using a budget is an effective tool in becoming financially healthy. The
following are some of the advantages of using a budget:
- A budget portrays your financial situation at any given point in time. It is a “living”
thing that can and needs to be adjusted as your income or expenses change. - A budget is an excellent tool to help you know the amount of money you are
spending on each category in any given month. Many of us get cash from our ATM
on a regular basis but have no idea where the money has gone at the end of the
month. - A budget highlights how much you can actually afford to pay for various category
items without going into debt. - A budget can discipline you to live within your means, rather than running up credit
card debt. - A budget can free you from financial stress. Knowing your income and your
expenses helps you to avoid accumulating debt or using “payday advance loans” to
get you through the month. A budget ensures that you will have enough money
throughout the month to meet your expenses. - A budget can help you either get you out of debt or keep you out of debt in the first
place. Diligently following a budget frees up money for items you really want to
purchase rather than having your money vanish without you remembering what you
even bought. - A budget encourages you to “pay yourself first.” By including a savings category in
your budget, you are able to begin planning for both short-term (such as vacations,
special gifts, etc.) and long-term goals (such as a down payment on your first home
or saving toward retirement). - Using a budget is an excellent way to begin to reduce your debt. By using a
disciplined system to pay down debt on a consistent basis, you gain control over
your finances.
There are four main reasons individuals generally fail to get ahead financially. These are:
a) Becoming impatient with financial goals, b) Giving into the instant gratification habit
of impulse buying, c) Getting into too much debt, mainly from the use of easy to-get
credit cards and d) Lack of self-discipline in saving money. The consistent use of a
budget will help you avoid these four pitfalls.
How do I get started in developing a budget?
Obviously, the first place to start is to list your income and expenses. Your income
should include not only your salary but any interest income, child support payments or
alimony. Tracking expenses can be a little more complicated. You can start by listing
your major expenses such as:
as lunch, gifts, recreation, magazines/newspaper subscriptions, etc. One way to get a
clearer picture of your spending habits is to record the purchases you make over the
course of several weeks. This will help you determine the smaller, non-recurring
categories and how much you spend in each category.
The following is one budget category format that you may find helpful, along with
estimated percentages to apply to each category:
Your expenses may not fit exactly into these categories or percentages. However, they
are useful measurements in determining your own specific balance. Even if your debt
load is higher than the recommended 15% to 17%, it’s important to keep paying down
your debt so that eventually it will be no more than 15% of your income.
Creditors use budgeting guidelines when determining credit worthiness. If you have a
higher debt ratio than listed above, you may be in danger of having credit denied to you or
paying a higher rate of interest on the loans you obtain. The goal of budgeting is not just
to help you with better debt relief but to help you eventually eliminate your debt entirely.
In developing a budget, you can use either a paper-based system or one of the numerous
computer software programs available. Regardless of the system or categories you use, a
budget can become a tool of financial freedom.
a) Becoming impatient with financial goals, b) Giving into the instant gratification habit
of impulse buying, c) Getting into too much debt, mainly from the use of easy to-get
credit cards and d) Lack of self-discipline in saving money. The consistent use of a
budget will help you avoid these four pitfalls.
How do I get started in developing a budget?
Obviously, the first place to start is to list your income and expenses. Your income
should include not only your salary but any interest income, child support payments or
alimony. Tracking expenses can be a little more complicated. You can start by listing
your major expenses such as:
- Housing
- Car payments or public transportation
- Utilities
- Food
- Insurance
- Clothing
- Savings
- Credit card debts
- Medical expenses
as lunch, gifts, recreation, magazines/newspaper subscriptions, etc. One way to get a
clearer picture of your spending habits is to record the purchases you make over the
course of several weeks. This will help you determine the smaller, non-recurring
categories and how much you spend in each category.
The following is one budget category format that you may find helpful, along with
estimated percentages to apply to each category:
- Housing (Rent, mortgage, repairs, improvements) - 28% to 35% (This will vary
depending on the region of the country in which you live.) - Transportation (Car payment, gas, oil changes, repairs, insurance, parking and public
transportation) - 20% to 24% - All debt payments (student loans, credit card debts or personal loans) – 15% to 17%
- All other expenses (Food, insurance, prescriptions, doctor and dentist bills, clothing
and personal) - 20% to 25% - Savings and investments – 5% to 10%
Your expenses may not fit exactly into these categories or percentages. However, they
are useful measurements in determining your own specific balance. Even if your debt
load is higher than the recommended 15% to 17%, it’s important to keep paying down
your debt so that eventually it will be no more than 15% of your income.
Creditors use budgeting guidelines when determining credit worthiness. If you have a
higher debt ratio than listed above, you may be in danger of having credit denied to you or
paying a higher rate of interest on the loans you obtain. The goal of budgeting is not just
to help you with better debt relief but to help you eventually eliminate your debt entirely.
In developing a budget, you can use either a paper-based system or one of the numerous
computer software programs available. Regardless of the system or categories you use, a
budget can become a tool of financial freedom.
Note: This article is for informational purposes only. If you are in need of mental health services, please contact a provider in your community. © 2008 Family Recovery Resources All Rights Reserved |
Couples frequently enter their relationship without ever discussing their attitudes and values about money. |
Couples often fail to get ahead financially due to the instant gratification habit of impulse buying. |
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