Some people think they don’t need a budget. Then again, some people also think socks and sandals look good together. Don’t be one of those people. There can be significant financial risks when you manage your money without this financial document. If you aren’t convinced, here are four signs you need a budget.
- You live paycheque to paycheque
The Globe and Mail reported that nearly half of Canadians are living paycheque to paycheque. This stat comes from a recent survey conducted by The Canadian Payroll Association. They revealed 46 percent of respondents wouldn’t be able to pay bills or other responsibilities if a paycheque was delayed — even if it was only late by a week. Another 35 percent said they felt overwhelmed by debt.
These numbers may normalize this kind of living situation, but it’s a dangerous financial condition. If you have to wait to pay for things until you get paid — or if you worry you won’t be able to pay for expected expenses in case of a delayed paycheque — you need to budget.
- You aren’t sure how you spend your money
You work 40 hours a week, yet you have nothing to show for it. Somehow, between the time it takes to deposit your pay and the time you look at your finances, your cash is gone. If you didn’t have the pay stub and ATM receipts to prove it, you would assume you were never paid.
If you aren’t sure how you wound up with zero money in your wallet or bank account, it’s time you get a budget so you can track where your money is going.
- You rely on credit cards
There’s a time and there’s a place to use credit cards, like when you want to build up your credit rating or earn points on a purchase you would otherwise make. You can even use them to make large purchases you can’t make on your own, but only if you know you’ll be able to pay it off by the next bill cycle.
If you have to rely on credit cards to pay off payday loans or use them to make unnecessary purchases you can’t afford, then you’re using them wrong. You need a budget to figure out how you can avoid relying on these products.
- You regularly pay overdraft fees and late penalties
It’s easy to take too much out of your chequing account when you aren’t sure how much is in it to begin with. Unless you have overdraft protection, your bank and credit card company will charge you a fee every time you withdraw too much from your accounts.
Missing payments because of financial difficulties won’t win you any favours either. Not only will you have to pay a late penalty, but you’ll also have to pay more interest for every day you’re late. Depending on your credit card’s APR, it might make sense to find an online loan with a lower interest rate and use it to pay off your balance. You won’t know if this makes sense for you financially unless you have a budget. If you’re looking to get an online loan today, make sure you have a budget first, so you know what rates work in your favour.
Read the signs!
If you just do one of these things on a regular basis, you need to change the way you think about your finances. The easiest way to do that is with a budget. This financial tool forces you to look at how you’re spending money in a way that clarifies those harmful spending habits that are putting your future at risk. It can also act as an eye opener when it shows how little you make. When you can’t cut down on expenses, you may need to increase your wealth with a side hustle or change of job.
Don’t worry if you aren’t sure how to make a budget. You live in a time when almost any information is at your fingertips. All you have to do is type into your favourite search engine, and it will dredge up guides, tips, and other hacks to making your first budget. Help yourself by checking in with popular financial blogs, like NerdWallet, CNBC, and Investopedia. You can even download an app that does most of your budget for you.
When you’re willing to look online for help, you’ll simplify your task. With a little bit of guidance, you can create a convenient and effective budget quickly. Once you have this document in hand, it can help you solve the problems outlined above.
