Budgets can be amazing resources. Not only can they keep your spending levels in check, they can also teach you a little something about yourself. After all, it is easy to spend money. We like to reward ourselves, and we spend money on stuff that we believe makes us happy.
What if I told you that keeping a budget does more than just "track your spending"? While budgets do track the money that you spend, they also reveal interesting tidbits about ourselves, including habits that we may never know even existed.
1. I was a huge spender.
I did budgeting wrong for years. I had my categories set up, with "Food," "Gas," "Rent," etc., similar to traditional teaching. I put money into those categories every paycheck and watched some categories grow faster than others. My "Gas" fund, for example, routinely grew faster than other categories because I drove far less than I had anticipated.
If I had been smart, I would have saved those overages into a savings or retirement account, but I didn't. Instead, I spent that extra money. I would steal from my gas fund in order to buy something that I wanted, rationalizing to myself that the money wasn't needed for gas and, therefore, was up for grabs. Over the years, I blew through thousands of dollars by using this trick, cheating both my budget as well as my future self.
When you cheat your budget, you might as well not have one. I had a budget, but it did nothing to prevent spending because I didn't respect it or the process. I loved spending more than saving.
The key is to not think of budgeted money as being "earmarked" for a purchase like I did. In fact, budgeted money does not NEED to be spent at all. It's okay if money builds up in categories. Anything extra, save! That's the point of a budget.
2. I absolutely love to eat out.
It is tough to pinpoint our weaknesses in spending money if we don't understand where our money is being spent. A budget will reveal your spending habits. It quickly became clear that one of my biggest weaknesses was going out to eat. I loved it.
In fact, I still do. I love the environment. I love trying new things. Also, I don't exactly enjoy cooking, so eating out is my way around cooking for myself. Unfortunately, it also costs a significant amount of money. My budget categories were lopsided in favor of my restaurant habit. Close to 50% of my discretionary spending funded this expensive habit!
The more specific your budget categories are, the more insight you'll glean into your weaknesses. You might spend far more on magazine subscriptions than you had thought. Or, maybe your cable and Internet bill just increased without your provider telling you. Without a budget and a diligent tracking of your spending, it is tough to recognize areas of overspending or increases in expenses.
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3. I had almost no safety net.
Perhaps the most startling revelation was my emergency fund - or lack thereof. I did have a "savings" category in my budget, but I'd only put $50 a paycheck into it. It took many months to grow, and I suddenly realized how weak my safety net truly was. If something catastrophic happened, I was in no position to foot an expensive bill to take care of it.
I was spending too much money on other things by purposely overfunding budget categories that I wanted to fund. I would steal money from any category that I felt was overflowing with cash and proceed to spend it. I devoted very little to short-term savings and my budget showed it. It was plain to see, I was in trouble and needed to make a change.
Over the years, I took what I learned from budgeting and developed a much more honest spending and savings plan. I know exactly how much I spend on restaurants versus cooking at home. No more magazines subscriptions or cable television. I've also upped my savings contributions to make sure that my savings far exceeds the money that I spend.
My budget showed me my weaknesses. Over time, I've turned those weaknesses into strengths. I now have a budget that I can be proud of, and a financial standing that follows suit!