This is a reader story from Dawn in Topeka, KS. We plan on regularly featuring stories from Personal Budgeting readers who share their personal experience with establishing a budget, paying down, and pursuing extra income. Want yours to be next? Just contact us and we’d be happy to look over your own story.
In my younger years, I naively believed that preparing a budget would solve all of my financial woes. Of course, sitting down to list out all of your expenses and calculating the total can be an eye-opening experience, but the end result of creating a budget was not as expected. In fact, I prepared budget after budget every few months with the hope that somehow it would solve my financial challenges. However, issues with an ever-shrinking savings account and increasing credit card account balances were strong indicators that I had a money problem. Preparing a budget, or at least preparing the budget that I had been preparing over and over again for months, was not the cure to what ailed me.
Those Unexpected Expenses
We all experience unexpected expenses from time to time. These are for things like unexpected medical bills after an accident or with an illness, the need to pay a deductible after a car accident or having to pay a huge plumbing bill when a pipe bursts. It was easy for me to complain that I could never stick to my budget because these unexpected expenses kept cropping up. However, over time, I realized those weren’t unexpected expenses at all. After all, did I really expect to go through my entire life without getting sick, having to call a plumber or getting into a car accident? The fact is that these things do happen, and I was not planning for them in my budget. While it seemed like I couldn’t make my budget work for me, the fact was that I was simply not budgeting in the right way.
A Dwindling Savings Account
Somewhere in my years of reading finance article after finance article, something finally clicked in my head. I head read a few articles in the past that said things like “pay yourself first,” but I had never thought about actually doing that. After all, if I didn’t pay the utility bill or the credit card payment, I’d face some serious consequences. On the other hand, there were seemingly no consequences for not adding money to my savings account on a regular basis. As a result, like so many others do, saving money always was the lowest priority on my budget. When those unexpected expenses cropped up, which was fairly regularly, I dropped my savings plans for the month. The result was an ever-shrinking savings account balance. However, I realized over time that my problem with increasing credit card balances was due to the fact that I had little savings to my name. Other people may have pulled money from their savings account to pay that car insurance deductible, but I had to pay the deductible with my credit card. Clearly, there was a correlation.
Fixing What’s Broken
At some point, it occurred to me that I wasn’t really using my budget in the right way. Sure, I had listed out my income and expenses like everyone else does, but I hadn’t taken into account things like saving for those not-so-unexpected expenses. I devised a more realistic budget that included ample room for savings. I made saving a priority by establishing an auto-draft from my checking account that occurred on the day my paycheck arrived. Then, I created sub-savings accounts that helped me to save for things like Christmas presents, a summer vacation, car repairs or a new car, home improvements and other expenses. After all, these are real expenses for me each year, so I should account for them in my budget. In order to start saving money for these things, I actually did have to trim back on a few expenses. I cut out cable and decided to put affordable streaming video to use. I stopped going out to eat so much and made an effort to eat affordable meals at home. I had to make sacrifices, but the fact is that I only had a limited amount of money to work with. Either I could save for a summer vacation and plan for an emergency or I could choose to spend my vacation money eating at restaurants.
While it seemed like my budget had been failing me, the truth was that I simply wasn’t budgeting in the right way. I wasn’t making my budget work for me. Since I’ve changed the way I’ve budgeted, I have reduced my credit card debt significantly, increased my savings account balance drastically and have stopped living with the stress of constant financial worry. If your budget seems to be failing you, it is worth your time to take a closer look and understand why this seems to be the case.