How Do Budgets Work?

Before credit cards were part of society’s mainstream purchase method, people paid for products and services in two main ways – either they bartered or they paid cash. In both these cases, they owned what they traded for or bought. Here are four things that budgets do:

1. Allow people to be more focused financially

Before I really got into budgeting and focusing on where my income was going, I would pull out my credit card if I saw something just to have whatever it was I thought I needed. I guess you would say I thought of credit as extra cash in my pocket – whoa, was I wrong!

When I really started focusing on my finances, was later in life. Your income and expenses must balance. Credit is an expense. You need to make sure all your current bills are paid FIRST, then the minimums of all your credit cards except for one, the least amount that you work to pay off FIRST – then rolling what you allocate to be paid until paid off for that card you roll the amount into the next one on the list in addition to the minimum you are paying, and so forth down the line.

2. Give your income dollars jobs to do

You don’t have to wait until next year to start budgeting. You should start next months budget at least a week of two before the next month begins. This way you have the current months bills paid, and are now getting ready for the next month, There are several good budgeting programs out there – some even for FREE. One I personally use is called “You Need A Budget (YNAB)” as I find it extremely customizable and easy to use. I have tried others, but always come back to this one.

3. Gives you greater chance to save more

Okay, you are focused and giving your income dollars jobs within your budget to do – one job first aBudgetingnd foremost is to have a savings account for EMERGENCIES only and work on saving $1,000 – 2,000 in this account. Don’t touch it! It is NOT AN EMERGENCY to have your nails and hair done; those are flexible expenses that need to be part of your main budget.

Recently this account came in handy when I had major automotive work done amounting to $900.00 – I did not have to put it on my credit card. However, tapping into these savings you MUST repay yourself every month until you bring the account back up to the $1,000 – 2,000 level. The good part is – it is YOUR money, you won’t be calling yourself if you are late paying it back and you won’t get hit with exorbitant interest charges.

4. Brings you greater enjoyment & less stress in your life

All in all, these are good reasons we all need to be budgeting and using less credit. I personally find budgeting brings greater enjoyment back into life and less stress. I never realized before all the things we can do that don’t cost and arm and a leg to entertain ourselves.

It’s important to communicate with every member of your family

When you are looking for a good budgeting program, easy of use and understanding is key. God forbid something happens to you, your spouse or child or someone else should be able to go in and keep everything paid until you are able to take over again. This is why it is important that you communicate financially speaking with every member of your family.

Well, hopefully this article has given you some good positive ways and answers the question you may be wondering, just how do budgets work. I look forward to hearing your comments and opinions.

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