Two Thirds of Americans Aren't Budgeting

Though budgeting has repeatedly been touted as one of the basic financial habits, not many Americans are budgeting their monthly income. According to a recent poll from Gallup, only 32% of Americans budget each month. Based on that statistic, it’s safe to assume the remaining 68% either don’t budget at all or don’t budget monthly.

Of those who do budget, the Gallup poll showed that people with higher incomes or college degrees were more likely to budget regularly. Even so, less than half the respondents in this group say they monitored their finances regularly.

If you’re having money troubles, failing to budget can be at the root of it all. Or you can use your budget to help decide whether you can comfortably afford a big purchase or a new monthly expense.

Even if you’re not necessarily having trouble with your money, a budget can help reduce the stress of making daily money decisions because you’ve already made a plan for how you’re going to spend. Just refer back to your plan to remind yourself of what you’ve previously decided.

Do you know how much money you have left after you’ve received your paycheck and paid all your monthly expenses? A budget can help you predict precisely how much money will remain after you’ve paid all your expenses. Or, budgeting may reveal an awful truth – that you’re spending more in a month than you’re bringing in. Recognizing this dangerous financial habit can prevent future disaster. You can only live outside your means for so long before you’re overwhelmed with debt and bills you can’t afford to pay.

A budget can make it easier to manage a joint income. With two or more incomes going into the same bank account, you have to be sure that everyone who has access to the money is on the same page on how much to spend and on what the funds should be spent. Taking a few hours each month to create or update your household budget together can prevent future arguments and disagreements about money. Both parties sticking to the budget can reduce the amount of financial stress in the relationship.

You may have managed your money for years without ever creating a budget, but it’s never too late to start. Creating a budget doesn’t have to take a long time. A simple budget lists your income at the top and then subtracts all your monthly expenses. You can create it by hand on a sheet of notebook paper or you can use spreadsheet software like Excel. There are online tools for creating budgets and software you can download on your computer. Choose the method that’s easiest for you to work with so you’ll have fewer excuses about maintaining your budget in the future.

Once you create a budget, you don’t necessarily have to recreate it every month. Instead, you can just update your budget to reflect minor changes in your income and expenses. You may have to make major changes to your budget if your income changes dramatically or you experience another major life change, like a marriage or divorce. While life events may make it stressful to budget, this is the best time of all to budget because it helps ensure your finances stay on track even when your life is a little bumpy.

Source: AP