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In todays here today, gone tomorrow society there are not many people that take the time to create a personal budget. Many feel that they dont really need it; while others just dont want to restrict their spending. With this in mind, its no wonder that personal bankruptcies are at such an all time high. The advent of credit cards and the wide spread availability of credit itself has allowed people to purchase what they want, when they want, with little to no regard of whether they can really afford it. There is small hope that these patterns of behavior will change in favor of living on a budget until the masses realize all of the advantages of a personal budget. Living on a budget relieves a great deal of financially related stress.
It's always fun to spend money but when the bill comes due, the fun is long gone. A lot of times when this happens people resort to what my grandmother use to call robbing Peter to pay Paul. In other words, they resort to using one credit card to pay on another card. Other times people choose to get whats called a "payday advance loan. " A payday advance loan is given by a credit company for a specific amount that will be automatically taken from your next paycheck. While this will put money in your pocket for the short term, in the end you will still be in the same hole. Either of these situations causes a viscous cycle of debt that can be extremely difficult to recover from.
A budget helps to ensure that debt is prevented and money will be available throughout the entire month. A budget also helps an individual regularly place money into a savings plan by freeing up money that they did not know they had. This allows for a comfortable retirement when that stage of life rolls around. It will also provide a financial cushion to cover any emergency situations that may arise.
Goal achievements are also an advantage of personal budgeting. Everyone has financial goals that they would like to reach in the future. Whether its a new house, a new car or even purchasing that new high definition flat panel television, a budget can help save money to make these goals a reality. Without a disciplined pattern of spending, many people find themselves being crushed under a heavy load of consumer debt that is virtually impossible to recover from. A personal budget helps provide the necessary framework needed to begin eliminating a great deal of financial debt. Another great aspect of a personal budget is that it does not offer an "either or solution", meaning you can either pay the light bill or pay your car insurance but not both.
When executed properly a budget allows a person to meet all their expenses, place money into savings, and pay back outstanding debt. Creating a budget is an important beginning to recovering from debt, however there are many pitfalls to watch out for. Credit cards quite often cause a great deal of temptation and trouble. People make unwise purchases simply because they have a credit card handy. The solution is to get rid of their credit cards and begin paying by cash or check. Keeping one card for emergency situations is ok, but it is best to keep this out of reach - not in a wallet or purse.
Other problems often arise from impatience. People set financial goals but do not have the patience to complete a savings program. Most debt is not created overnight and therefore will not be solved overnight. Lack of adjustment is another major pitfall. Most budgets are created using a set of expenses and income figures from a set moment in time. It is important that the budget is adjusted to reflect changes.
A failure to do so, could lead to some major deficits. Many people do not consider holidays when they are creating their budgets. Proper consideration should be taken for money to be set aside for presents, food, etc. These items should be factored in and saved for throughout the entire year. Vacations can prove to be another major pitfall.
While some accurately factor in the transportation and accommodations, they underestimate the amount of money needed for food and entertainment. Keep in mind that at any kind of resort destination or tourist spot the prices can easily be 2 to 3 times more than what you would normally pay at home. While a budget can show you the path to financial independence; in the end, personal discipline will decide your financial future.
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