Personal Budgeting

The first step in financial fitness is establishing a personal budget for the household. The personal budget serves to track incoming income and outgoing expenses that the household would need to maintain every month to stay viable. Keeping track of this amount of money coming in and out of the home is important as it allows the individual to save and set financial goals for themselves. The negative consequences of not maintaining a personal budget can be financially debilitating and will be explored throughout the paper. Without a personal budget a family can often be lost in regard to where they stand financially and what they can afford to take on.

There are immediate financial consequences for not maintaining a budget. One of the most immediate consequences would be that bills may not get paid on time and there would be a threat to losing important household services such as utilities, entertainment or even the house itself. Through creating a personal budget an individual can keep track of what bills need to be paid and by when. “A budget executed properly, should help you see where your money is going, get more utility out of every buck, and help you save some extra for future use” (Turner, 5). This would allow them to go through their finances to figure out areas that need to be cut or reduced. However, without a personal budget these steps cannot be taken and they may find themselves playing catch up every month to pay all of their bills. They would then have to face creditors if they could not maintain their bills.

There are other immediate consequences, such as when an emergency arises. Personal budget planning allows a family to be able to set aside money in savings for emergencies. Without a safety cushion, a medical emergency or unintended expenditures such as car repairs can set a family back. According to Martin (141), having a financial vision for the family allows the personal budgeting process to go easier as the whole family will be behind the goal. Personal budgeting also has positive consequences as it would allow families to save for a big vacation or other items they have wanted to purchase. Without a personal budget however a family may spend more on items than they can afford. By having a personal budget the household can accurately determine how much they can and cannot afford.

A lack of personal budgeting can have long term financial consequences for an individual or family. Without a personal budget, bills and debt can pile up, which would then affect their credit ranking. This would significantly limit the ability of an individual to buy a home, car or qualify for certain student loans. A low credit score can lead to higher interest rates and limits the ability of individuals to buy items at a lower price. This can strain the family financially as each purchase can set them back further. Other long-term consequences of personal budgeting are teaching younger children in the family early to be financially responsible. Through instilling these goals early on they will then learn to apply them when they have their own family.

In our age of uncertain economic times maintaining a personal budget so your family is financially secure is a vital step in ensuring financial freedom from debt. Through having a personal budget you are fully aware of all of your finances. This would also allow you to be better equipped to make financial decisions. Through becoming free financially a family will reduce a significant amount of stress that can occur with being strained financially. This financial freedom allows families and individuals to pursue higher goals.

References

Martin, D. H. Budget and Save Your Way. Booktango, 2013.

Turner, Madison. Family Budget Planning. Clinton Gilkie.