Why You Need a Budget

Personal finance educators agree that keeping a budget is the foundation for a viable financial plan, and therefore the foundation that will keep families far from filing bankruptcy.

Unfortunately, a recent poll revealed that only 32 percent of Americans create a budget to track cash inflow and outflow every month. Budgets help spenders make good spending choices by keeping track of the money they have to make purchases. They prevent them from spending where they can’t, and almost everyone can benefit from a budget.

Ordinary consumers are not like businesses: they don’t borrow money, pay it back with interest, and make a profit. Every dollar a consumer pays in interest is a dollar he or she doesn’t have for something necessary in the future. As consumers trying to avoid debt and bankruptcy, they need to be in touch with their spending.

A helpful article from the Daily Messenger details why consumers need a budget to avoid the stress of debt and possibly bankruptcy.

The value of a budget is that it forces a spender to get in touch with where his or her income is being spent, analyze that spending, make deliberate spending choices, and look for alternative ways to have things he or she really needs or wants.

As the author of the article states, one of the biggest problems Americans face in our society is that too many people are on “automatic spending pilot.” They spend money on what their friends, family, colleagues, and peers spend money on. What Americans see in advertisements, television, or movies also has a huge effect on spending habits.

Without a set budget, consumers often don’t think about whether the urge to buy based on needs, wants, and wishes is within what is affordable. Consumers just spend.

The top 1 percent of income earners in this country may have money to spend on anything at any time, but 99 percent of consumers don’t have that privilege and must learn to make responsible spending choices.

Although making responsible spending choices is a must, and a budget will make those choices a lot more clear, debt is sometimes still unavoidable. If you find yourself in a tough financial situation in Louisville, Kentucky, and feel as if you have run out of options, contact the experienced bankruptcy attorneys at the Wallace Spalding Law Office.