If you're like
most Americans, your monthly
income never goes far enough.
After shelling out for house
payments and groceries, it seems
there's little leftover for
things that matter most to you
-- weekly dinners out, orchestra-row
theater seats, a college savings
plan for your kids.
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4 reasons to budget |
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Hate to break it to you, but it's not your salary that's to blame. According
to financial experts, it's a pattern of poor spending choices.
"When my clients
sit down and really look at
where their money is going,
oftentimes they are shocked
to find it has nothing to do
with what's really important
to them," says Martin Siesta,
a certified financial planner
for Compass Wealth Management
in Maplewood, N.J. "Five dollars
a day on Starbucks, for example,
is a big number when you multiply
it by 360. That takes away from
things you may have been struggling
to attain."
Life's little
extras are well within reach
for those who know how to budget.
By establishing
reasonable spending limits and
sticking to them, the average
consumer can do far more with
less -- without sacrificing
daily conveniences, said Jim
Tehan, a spokesman for the Myvesta
Foundation, a self-help consumer
education Web site.
"Budgeting
is all about controlling your finances instead of letting your finances control
you," Tehan says. "That element of control is going to save you money
in the long run."
Controlling
debt
Financial mismanagement makes
consumers more vulnerable to
overspending, which results
in lower savings and higher
credit card debt.
Myvesta's 2005
annual Credit Card Survey, reports
the average American carries
$2,328 in credit card debt,
spread out across 2.9 cards.
With interest rates at or above
18 percent for most cards, that
gets expensive. For example,
a $5,000 balance on a credit
card with 18 percent interest
would cost you more than $8,000
to pay off if you made only
the minimum payments (4 percent).
"The amount of
money you wind up spending just
servicing debt through credit
card interest could be extra
money you could apply towards
something else," Siesta says,
adding that following a monthly
budget can help you both pay
down existing debt and prevent
impulse spending to begin with.
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