Budgeting, while not the most exciting way to think of starting summer, is a step to feeling secure that many Americans overlook until it’s too late.
The 2014 Consumer Financial Literacy Survey reveals that about 1 in 3 U.S. adults carry credit card debt month to month. One in 3 adults also do not put any of their income toward retirement savings. And over 60 percent of Americans do not regularly keep a budget.
Financial expert Patrice Washington suggests the real reason people don’t budget is that they consider budgets to be limiting, when the contrary is actually true. In her meetings with clients, she tells Forbes' Maggie McGrath, Washington stresses that budgets are about discipline, not deprivation. Budgets do not take away; they give us more, because they allow a clear understanding of what’s available. This vision allows for better planning. It’s much easier to reach a destination with a map instead of just heading off without direction.
The discipline portion of budgeting is something Washington emphasizes in her work. Clients often think the only way to see money cross over month to month is to cut something huge from regular expenses, but modifications are usually an easier step than big omissions. Money can be saved by cutting the cable cord, making lunch at home instead of ordering out every day or locating ATMs that don’t charge fees for you to withdraw your own money.
Budgets need to be a bigger priority in American life. They affect everyone, from the federal government to the local school board looking for technology funds.
On a relatable level, the National Postsecondary Student Aid Study bares the uncomfortable truth for students: The class of 2015 is carrying the most student loan debt in American history. Four-year degrees, on average, result in debts of $35,000 per student. That trend doesn’t appear to be declining anytime soon, which means trends in saving and spending may follow the same upward scale unless changes occur.
One change individuals can make is to begin to comprehend their personal finances and adopt a budgeting template that works for them, such as the 50-30-20 rule. This guideline means using 50 percent of income for immediate needs, such as rent, mortgage, car payments or utility bills. Thirty percent goes to wants, and 20 percent goes to savings, although some financial experts debate on swapping the 30 and 20. Of course, this would also require a discussion on the difference between wants and needs, an important one to have early in the budgeting process.
In fact, budgeting is a great habit for children to implement early on. Just ask the student participants in a budgeting campaign started in 48 communities in Ohio, West Virginia and Pennsylvania. The Teach Children to Save Campaign explained concepts of banking and budgeting, then offered to match up to $10 in any student’s bank account if the student left the original $10 contribution alone for 90 days.
Discipline, a skill that seems to take a lifetime to master, is the key ingredient in successful budgeting. And budgeting is the pathway toward a brighter, more secure financial future.