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Why Budgeting Should Not Be Likened To Dieting

money and measuring tapeBudgeting is said to be the first step towards financial independence. If that is the case, then why is it that a lot of Americans are finding it difficult to maintain a budget? In some cases, they even have difficulty in starting one.

This is probably caused by the lack of motivation to follow a budget plan. This is especially true if you think that a budget is a lot like a diet.

In truth, there are a lot of similarities between the two. An article on actually discussed various similarities between dieting and living on a budget. In fact, the author of the article mentioned that a diet is defined as restricting one’s food intake. The same is actually happening when you are budgeting. You restrict your spending on some things so you can keep yourself from running out of finances of the expenses that matters most. In general what you want to happen with your budget is to stop overspending your money.

However, there are people who have not been successful with their budgets because they associated it with dieting. That is because in terms of motivation, comparing a budget to a diet is not the best way you should go about it.

3 ways diet concepts can ruin your budget intentions

An article published on in 2011 is titled, “Why a budget is like a diet – ineffective.” In one part, the article discussed how humans are notorious for not being able to follow plans. While there are those who undoubtedly can, there are also people who are incapable of doing so. In fact, some consumers frown upon budgeting as they would a diet plan. The article said that it is because a budget feels so much like dieting – that is why it is met with so much distaste. People end up shying away from budget plans simply because it is associated with diets.

The reason why people are scared to budget in the same way that they are of dieting is because it is oftentimes associated with these three concepts.

You feel you have fewer options

When you are on a diet, you are oftentimes told to eat only healthy meals. That makes your options quite limited. You are not allowed to eat certain food and drinks in order to keep yourself in tip top shape. Unfortunately, a lot of the food that we are told not to eat are those that taste good!

The same is true for budgeting. When you create a budget plan, you are faced with the reality of how much you can really afford to spend. After you identify your net income, you need to divide it among the important expenses that you make each month – for the house, utilities, food, transportation, etc. Whatever is left will have to be put aside for your savings. There is not much room for splurges or unnecessary spending especially when you have debt payments to include in your budget.

However, you do not have to feel this way about budgeting if the few options are the most important expenses that you have in your life. Even if you had to cut back on a lot of things, if the vital expenses are met, then you should not feel that you have fewer options. You just gave up on the spending that you do not really need.

You feel deprived

Since you have fewer options when you are budgeting, you will naturally feel deprived. When you are on a diet and you love to eat junk food, greasy food and all the other fattening stuff, you will feel deprived after entering a diet plan. These are the big no-nos in dieting.

In the same way, following a budget would also mean you have to stop doing the habits that are bad for your finances. Things like impulsive buying or buying things without comparing prices. These practices can be harmful to your finances. Your budget plan will deviate you from these practices and this is why you are bound to feel deprived when you are budgeting.

But just like the first, you do not have to feel deprived if you also focus on your priorities. As long as the priorities in your life are satisfied, you should not feel deprived at all. We make budgets hard to follow because we keep our eyes on what we cannot do. But if you concentrate on what you can now achieve (e.g. bigger savings, room for investments, lower debt balance), then you should not feel the deprivation at all.

You feel the pain

Lastly, dieting is usually associated with a lot of pain. This is mostly caused by the exercise that you need to do while you are regulating your food intake.

In the same way, budgeting could bring you some sort of pain as well. First of all, a budget plan is not a one time effort. You need to constantly monitor it and revise it as your financial needs change. Not only that, if your budget reveals that your current income is not enough, you may be forced to look for a second job in order to make ends meet.

Some people may say that if a budget will force me to work 2 jobs, why would they want to create a budget plan in the first place? While the sentiment is understandable, you should realize that not acting on what your budget plan encourages you to do is only delaying the inevitable. If you are spending beyond your means, you are bound to accumulate a lot of debts. Your budget will save you from that but you need to deal with the sacrifices that come with it.

Tips to make budget plans more bearable

In the end, budgeting and dieting may have some negative things in common but the bottom line is, they are both necessary because they keep you from bigger problems in the future. But if associating one with the other will keep you from incorporating a budget plan in your life, then you do not have to treat them the same way.

A budget plan is still different because it involves your finances. You need to look at a budget in such a way that will liberate you from the threat of a financial disaster. A budget can really improve your finances because it helps you be in control of your money.

According to an infographic found on, more than half of Americans do not have a budget and that one-third is unable to pay their bills on time. There may be a lot of factors involved as to why consumers cannot pay their bills on time but you can bet that one of these reasons if a lack of a budget.

In case motivation is a problem, here are some tips that might help you set up a budget in your life.

  • Start with a goal. This is the best motivation that you can give yourself. It can be to get out of debt or save up for retirement.
  • Go slow. If you discover that you have a lot of expenses that are unnecessary and that you have decided should be cut off, try to do it one at a time. Do not go cold turkey to keep the pain from becoming too hard to bear.
  • Create a timeline for your goal. Keeping in mind that you need to go slow, create a reasonable and realistic timeline to achieve your goal. That way, you will not push yourself too hard or be too relaxed in reaching your goal.
  • Make your budget as accurate as possible. Wrong entries in your budget might lead to incorrect assumptions and thus the failure of your budget.
  • Get support. If things get really tough, you may want to get support from family and friends. Or if you can afford it, go and get professional help. In most cases, the first few steps are always the hardest. But once you get one foot in front of the other, you will find yourself effortlessly following your budget.

To learn how to set up a budget, here are some tips from National Debt Relief.

7 Ways You Can Make Budgeting Fun

woman carrying groceriesThere are several good reasons why you use a budget in your household finances. Budgeting is the first step towards financial independence. Not only that it can help you strategize how you can reach all of your financial goals.

Best of all, a budget can help you avoid debt. An article from revealed that the unexpected costs are not really unexpected. We know that they will happen. The problem is, we do not budget for them. We sometimes fail to prepare for expenses like birthdays, weddings, and even car repairs just because did not put them in our budget plans. If you think about it, these are expenses that know will happen. Weddings are once in a lifetime events that couples will reveal months before the actual date. Birthdays happen every year. Car repairs – each car part has a specific lifespan that you should be aware of. These are all expenses that you should be prepared for because you know that they will happen. Even the real emergencies like accidents and illnesses can be prepared for in advance. You just need budgeting to prepare for all of them.

The truth is, we all know how important having a budget is. However, not everyone is successful at it. The reason for that is a wrong perception and implementation of a budget plan. Some people find a budget plan to be restrictive and complicated. But an effective budget is actually not complicated nor is it restrictive. In fact, a budgeting can be fun if you know how to implement it correctly.

How can you make budget implementation fun

Some people start organizing their finances but end up giving up on it because they are having trouble sticking to a budget. If you want some motivation to make a budget plan a regular part of your life, you may want to follow these 7 suggestions to make budgeting fun and in effect, easier.

  • Use a budgeting application. There are so many budget apps that are available in the market. You can start your search by going to review sites or news websites like for a list of the best apps that you can use. These apps can help you organize your finances easily. It can also help you automate the tracking of your finances. The app can make budgeting less tedious and that should encourage you to continue using it so you can monitor where your money is going.
  • Anticipate your goals. All budgets should be aligned to your financial goals. Your goals can be to pay off your debt, grow your savings or put aside money for investments. These are all great financial goals that a budget plan can help you achieve. To make your budget more fun, you might want to keep your eyes focused on your prize. If you have to create a visual representation of your goal, then do that. Put it in your ref or your workstation. If your goal is buying your dream house, print a small photo of that and tape it to your credit card. That should make you think twice before you use your card for unnecessary purchases. Your goal should keep you motivated to stick to your budget plan.
  • Set up milestones. If you have long term goals, it helps to set up milestones so you can be encouraged to implement your budget to reach them. These milestones will help you concentrate and take note of the progress that you are making. Every time you reach a milestone, you will find the motivation to reach the next milestone. Having these little goals will give you something to look forward to as you deal with the sacrifices involved in changing your financial habits for the better.
  • Give yourself small rewards. If the milestones are not enough to motivate you, give yourself small rewards after reaching a milestone. Or, you can reward yourself if you stick to your budget every month. For instance, if you succeeded in paying all your bills on time, allow yourself to give in to small indulges – as long as it is still within your budget.
  • Make budgeting a group activity. Involving other people in your attempt at budgeting will help make it more fun. Let your friends in on your budget plan efforts and encourage them to do the same. Compare notes and you can even turn it into a game. You can also include your family – especially when it comes to saving. Let your kids compete at who will have the most savings each week. These should make the sacrifices needed in implementing a budget more acceptable.
  • Join a community. If you cannot find friends who will be with you in your budgeting efforts, you can find companions online. Find an online community and share your experience with them. You might find some advice on how to stick to your budget plan. It helps to know that you are not alone in your struggle. And talking to real people who have successfully passed the difficulties that you are going through should make things easier for you and will keep you from feeling discouraged.
  • Learn something new. If your budget plan requires you to lower your spending, you might want to learn something new so you can meet that budget goal. For instance, learn how to bake so you can lower your food costs. You can also learn how to make your own household products to save on groceries. Not only will you be successful in sticking to your budget, you can also improve your skills.

A budget plan will help you spend on the important things in your life

One of the benefits of a budget plan is it will allow you to spend on the things that are important in your life. Contrary to what others perceive about budgeting, it will not restrict or deprive you of what you want to spend on. The goal of a budget is to help you find the means to pay for what you love to indulge on without putting you in debt.

According to, less than half of consumers spend more this year compared to the last. Only 18% said that they are spending less. When these expenses are detailed, it is revealed that the increase in spending is mostly on household necessities like groceries, utilities and gas. This could mean that consumers are wising up when it comes to spending – which is a good thing. But that also means that a budget plan should still be implemented because of the following reasons:

  • It can help you organize your money. One of the benefits of budgeting is in helping you organize your finances. You can identify how much money you are earning each month and where each penny will go. You can control that and make sure that it only goes where you want it to.
  • It can help you make financial decisions. Having an idea of your overall financial situation is one of the best benefits to a budget plan. If you are tempted to buy something, you can simply consult your budget to see if you can afford it or not. If not, then you can choose the expenses that you can cut back on to afford it. If there is none, then you know that the answer to your expense is a no.
  • It can help you grow your savings. A budget plan will give you more chances of meeting your saving goals. You can decide to put aside $500 a month and identify the expenses that you will cut back on to meet that goal. Without a budget plan, you might save only what is left after your expenses are met – which is usually one of the best ways to fail at saving. You have to admit that saving last usually ends up with you having nothing left to save.

It can help you stay out of debt. Since budgeting helps you save, it is one of the best ways for you to stay out of debt. That is because any unexpected expense will not have to be borrowed. You have your savings for that. Not only that, any expense that you will make on your credit card can be included in your budget. That way, you can pay it off at the end of the month and you know your monthly credit limit.

3 Expenses You Should Never Sacrifice In Your Household Budget

frustrated woman with a paper and calculatorIf you believe that budgeting is one way to get out of debt, then you should understand the importance of creating a household budget. A lot of Americans are dealing with debt – some of them are managing credit wisely while others are failing at it.

After the Great Recession, we have come to realize just how important it is to have a budget plan. It can help you control your expenses so you can put aside more money to pay off your debts. The extra money can even be sent towards your savings. It can also help you avoid a lot of financial dilemmas in the future. It can help you understand why you are in a particular financial situation and how you can get out of it.

Why do we need to cut back on our budget

Taking a look at how Americans spend their money is a great way to help us understand our financial habits. According to, the majority of the household budget is spent on food. Now, the majority of our budgets go to housing costs. Among the things that grew in percentage in our budgets include healthcare and entertainment expenses. These details will all be evident in your budget and it is important for you to analyze them so you can determine the changes that you need to make in order to improve your financial situation.

In most cases, people who are forced to use a budget plan are those who have a need to cut back on expenses. The main reason for that is debt. We had to cut back on a lot of things because we need to increase the amount allotted for our debt payments.

In an article entry on, they mentioned a statistic from Experian that revealed the average monthly debt payment of consumers. In 2010, the monthly debt payments of Americans range between $763 to $1,285. If the average household earns between $4,000 to $4,500, their debts take up 20% or so of their income. They only have 80% left to live on. With utilities, food, transportation and other expenses, how can the average American household survive?

This is why a lot of us create our household budget for the purpose of cutting back on expenses.

3 expenses that you should not compromise in your budget plan

But while there are so many things in our usual spending list that we can trim down, there are those that you need to exert caution when trying to cut back on them. There are certain entries in our budget plan that we should never sacrifice.

Healthy meals

The first is healthy and nutritious food. Even if the processed food is cheaper, it is not worth it to risk the health of your family just so you can save a couple of dollars. You still need a well balanced diet and that is something that you should never compromise. If you want to trim your food expenses, you may want to cut back on eating out. These cost a lot more than what you will spend if you cook your meals at home. And when you are out shopping for food, make a list of what you need. That way, you can forecast in your household budget the amount of money that you will need to ensure that your family will eat healthy food always. Here is a video from HowCast about how you can feed your family healthy food even when you are on a tight budget.

Doctor prescriptions

When the doctor prescribes you medicine or treatments that you need to get better, you should not skip on this just so you can trim your household budget. If you have to save, go and ask your doctor to prescribe generic medicines. But do not skip a dosage or take a lower one just so you can save. Get the savings you need elsewhere and not your medications. Your health is a top priority. If you do not take care of it now, it might get worse and cost you more money in the process. One of the best ways to deal with big medical bills is to avoid them by taking care of your body.

Personal hygiene

There are so many things that this can cover. For instance, buying a very cheap make up just so you can save on money and end up getting an allergic reaction is not really the wisest of moves. Proper hygiene is something that you need to be careful with. Try to get deals for toilet papers, and similar products but do not buy nameless brands without making sure if it is safe for you. In the end, it might cost you a healthy body if you sacrifice proper hygiene for the same of making budget cuts.

How to fix your budget plan if it is not working

If you are already implementing a household budget and you realize that things are still not improving, you may need to reconsider your budget plan. Here are 5 steps that you can follow to help fix it.

  1. Track your spending. In most cases, when your household budget is not working, it only means there is something wrong with your expenses. Of course, it always pays to take a look at your income too. Maybe you based your budget expenses on the wrong income. But even if this is the case, you still have to take a look at your expenses. and other authority sites have listed some budget software programs that you can use to track your spending.
  2. Compare your spending with your existing household budget. Once you have tracked your spending, compare it with your budget and see where you are spending a lot of money on. This will help you see where you should cut back on or where you should adjust the amount in your budget.
  3. Analyze why you are overspending. If there is a particular category that you are guilty of overspending, you need to ask yourself why that is so. Is it because you do not have self control? Or is it because you simply made unrealistic cuts in your budget?
  4. Do something to stop overspending. When you have identified the reason why you are overspending on a particular category, you need to correct that or cut back on something else to meet your budget limit. If you are overspending on food because you keep on eating out, then you need to cut back on that and opt for home cooked meals instead. Revise your household budget according to your plans to stop spending beyond what your budget dictates.
  5. Commit to the new plan and observe. Be disciplined in following your new plan and see if it works for you now. If not, then you need to go back to step one and analyze your budget plan once more.

Making your household budget work will involve a lot of changes in your habits. You have to look deep into your financial habits so you can determine if that is what is causing you to fail in your finances. Sometimes, it is not really the debt that is the problem. It is our own behavior when it comes to our money. We need to learn how to change our behavior and that is the only way that we can implement a budget that is effective in improving our financial situation.

4 Benefits Of Budgeting That Goes Beyond Your Income And Expenses

budget on top of moneyIf you really understand budgeting, you will never need an explanation why you have to implement it in your life. Nobody took the time to budget their money and follow it strictly yet still ended up in a financial crisis. No foolproof budget plan will ever lead to your financial demise. If you really want to improve your finances situation, one of the things that you cannot live without is a budget.

Sadly, it seems like Americans are slipping back to our old ways. The effects of the Great Recession included a more cautious American spender that used a budget to keep themselves from overspending. That time seems to have passed.

According to the latest survey from the, majority of the respondents (3 out of 5), revealed that they are not budgeting and keeping track of where they are spending their money. This is one of the habits that got most of us in debt and in a lot of trouble in the mid 2007 to 2008. Those who claim that they are spending less is also declining – which indicates that consumers are increasing their purchases. While this may seem good for an economy that is 70% reliant on consumer spending, that does not really bode well for the average American household.

We are not saying that you should stop spending. We are in a consumerist society. Not spending will be very difficult to do even if that is what you really want to happen. What we really want you to do is to keep on spending but before you do that, you have to seriously implement budgeting in your life. That way, you can easily monitor where your money is really going.

4 ways your budget plan can help your finances

If you need some motivation to get started on your budget plan, you may want to focus on the benefits. There are many positive results to budgeting and it goes beyond just telling you what your income and expenses are. To get you excited, here are 4 ways that a budget plan can help improve your financial management efforts and ultimately, increase your personal net worth.

You can take care of your future self.

Although it might seem far off, you have to believe that every decision that you make today will dictate the life that you will live when you retire. If you have the habit of splurging your income in your youth, your older self will feel the effects of that. A credit card debt that accumulated since your 20s or 30s can haunt you for the next few decades – especially if you decided to pay only the minimum of what you owe. Based on a study done by the Employee Benefit Research Institute and published on, the retirement confidence in 2014 is slightly better compared to 2009 to 2013. But although that is true, there is still 24% of workers who are not confident about their finances when they retire. The study revealed that those who felt confident with retirement are usually those who had a plan in place. If this is your sentiment, then you should realize that budgeting will help you organize your income so you can ensure that your retirement contributions will always be met.

You can plan your spending splurges.

Some people have the wrong idea about budgeting. They think that when they plan their expenses, it will put them in a very restrictive and depriving way of living. This is not true. If you know how a budget works and you can implement it correctly, you will realize that you can splurge on the things that you want and not feel guilty even if it is unnecessary. That is because your budget plan will help you identify the priority expenses and shift other purchases so you can make smart splurges every now and then. That way, buying new clothes or that new camera will give you genuine pleasure because you know that your budget is allowing that purchase.

You can spot spending leaks.

Another benefit of budgeting is it will tell you where you are spending your money in places that you really should not. By seeing these leaks, you can move to seal that off or at least, schedule it so your other priority expenses will not be compromised. A budget plan is usually on a monthly basis. Those $1 or $5 purchases may not seem like much but if you total them, it will show you how it is eating up your finances and compromising your true spending capabilities. Once you have seen the leaks, it will be easier to make the sacrifices that will lead you to stop wasting money on them – like brown bagging your lunch or carpooling.

You can be one step closer to meeting your goals.

Any financial goal, big or small, requires a plan to achieve them. That is how you ensure that you will succeed in achieving the goal. If you want to make managing financial goals easier, that can be accomplished by a clear and foolproof budget plan. Of course, it has to be partnered by implementation but the planning by itself puts you one step forward in reaching your goals. A budget allows you to put aside the necessary contributions needed to make your goals into a reality. It will also help you determine your progress so you can gauge if you need to kick your saving efforts up a notch.

Common pitfalls your budget can save you from

As you are implementing your budgeting efforts, you also have to be aware of the pitfalls that can be averted by following a budget plan. There are three important financial mishaps that it can save you from.

  • Being late on payments. You will never be late again you input all of your debt payments into your budget plan. You do not have to worry about not having the money to pay off a financial obligation because your budget will make sure that you have put aside the contribution for that. But again implementation is the key to never be late on your due dates.
  • Foregoing saving because of too much expenses. revealed that one of the habits that helped selfmade millionaires is their ability to save. You may think that this has no room in your finances because of too much expenses. If you list everything down in a budget plan, you can identify the details that you can remove so you can make way for your savings.
  • Wrong assumption of your financial capabilities. This happens to most of us. We think that we can afford something when in truth, we cannot because there is a more important place for your money other than an impulse buy. Your budget will easily give you an idea about what you can afford to spend and what you cannot. Consult your budget at all times so you can stop overspending once and for all.

Budgeting can really work wonders in your financial life but, as mentioned several times, you have to be disciplined in following it. In case you feel like you budget is very difficult to implement, you might have created an unrealistic one. Do not be afraid to revise it if you have to. In fact, you need to keep on revising this budget plan so you can ensure that it is still aligned with your current financial priorities.

Why Spending Never Works Out The Way You Plan

frustrated looking womanThe lessons learned from the 2008 recession prompted most of us to seriously consider financial planning. One of the things that we kept a close eye on was our spending. In truth, those bad spending habits that we got used to became our financial undoing. We spent beyond our means by using credit cards recklessly and it cost us a lot of money. For some of us, it led to losing some of the assets that we hold dear. It meant letting our homes go into foreclosure, selling our cars and even skipping the usual entertainment expenses that made us really happy.

Thankfully, financial plans can help us curb the bad habits that led to our money’s demise. But be very careful. Even if you create the most promising plan there is, you need to be able to implement it. A lot of us started strong with our plans but unfortunately, not everyone was successful in applying it in their lives.

A plan is necessary to keep your finances under control and this article will try to analyze why your spending never worked out that way you planned it to.

Comparing your budget with your spending plan

In most cases, your spending plan is confused with a budget plan. Some articles actually refer to them as one and the same. But you need to know that they are two separate concepts. Budgeting is the first step towards financial independence and your spending plan will serve as your action plan to connect them.

Here are other concepts that will help you differentiate the two.

  • Spending plans will be more appealing to follow because it does not have the restricting image of a budget plan.

  • Budgets will tell you how much you are allowed to spend for a specific expense category. The spending plans will allow you to control that total amount to satisfy your actual needs.

  • Spending plans can help you detail your wants and needs. A budget plan is more concentrated on your expense categories.

  • Budget plans will help you define what is left for your discretionary income. Spending plans can map out where you discretionary income will go.

More importantly, your spending plan will help define the different patterns that you have in your life. You can see when your housing costs spike and when food prices go up. It can help make your future financial plans more accurate.

Reasons why your plan for monthly expenses is not working

Now that you know how to differentiate a budget from a spending plan, let us identify the possible reason why it can fail you.

It does not include everything. We’ve mentioned how this plan is actually more detailed than your budget. You have to make sure that it includes all the expenses that you usually make. This is how you ensure that it remains true to the restrictions of your budget. You do not want to end up spending more than what you are allowed to. Ideally, your purchase plans cover a period of one month. Make sure that you include your annual and seasonal expenses too.

It failed to indicate your priorities. Another reason why this plan can fail you is when you did not indicate your priorities. This is very important to keep your plan from concentrating too much on the mundane expenses that make you happy. The whole purpose of planning is to ensure that you will not miss out on all your expenses. Put the priorities high on the list and make sure you understand the factors affecting them. In fact, published an article that indicates how every generation usually have different priorities. For instance, Baby Boomers lived after the second World War and it made them heavy spenders compared to other generations. Millennials witnessed how the 2008 recession crippled their parents and grandparents financially, that made them more cautious about credit – especially credit card spending.

It is not realistic. The third reason it is not working is because it is not realistic. You may want to spend a lot on entertainment expenses but when your needs dictate that more funds should be allotted for your debts, then you should reconsider your plan. Based on the data from the Bureau of Labor Statistics ( last March 27, 2013, the average expenses of households depend on the income. The highest 20% allott 30.2% of their income in housing costs while the lowest 20% spend 40% of their income on the same category. In terms of food, the highest 20% spend 11.4% as compared to the lowest that spend 15.8% of their income on this expense. For personal insurance, the lowest 20% spend only 2.1% – which is very low compared to the 16% of the high income earners. Obviously, the low income earners have to forego insurance to pay for more important expenses. Your spending plan should consider all of these to make it realistic and true to your needs.

It is not flexible. Lastly, your plan may not be flexible and that is the reason why it is not working for you. Most spending plans require changes from time to time – just like your budget. As mentioned, your priorities are influenced by a lot of things and this should be something that you consider carefully. As you age, your needs will change and that should prompt you to constantly look at your spending plan to see if it is still workable.

Tips to create a working plan for purchases that compliment your budget

To be a smart spender begins with a well crafted spending plan. Here are some important considerations when you are trying to make this.

  • Base your spending on your net income – not our gross. Nobody ever sees their gross income. If you base it on this amount, you will always fall short and some of your expenses will end up being unpaid.

  • Always analyze your current spending. What you are spending a few months ago may not be the same as what you need right now. Always check if your spending plan is still aligned with your goals.

  • Categorize your expenses to keep the revisions from being tedious. You can put the fixed expenses first as these are the regular payments that you constantly have to make. In most cases, the amount does not change. These include your rent, loan payments, etc. You also have the flexible expenses that are still necessities but vary in amount every month. Your food, groceries and transportation can be placed here. Lastly, you have the discretionary expenses that are the expenses that you do not need to spend on all the time. These can be your clothing, shoes, and entertainment expenses. When you have to revise your plan, you only have to look at the flexible and discretionary expenses.

  • Make sure your income is higher than your expenses. If not, you will always have to spend some credit to take care of everything. That defeats the purpose of using this financial plan. Trade off some of the expenses that you can live without so you can afford those that you need to spend on. shows that the average household income is at $43,000. With the rising cost of living, this is just enough for a family of 4 to live on. If you want to make your spending less restrictive, you should consider earning more or cutting back. The bottom line is to make sure that you can control where your money goes and the plan that will help you achieve that is something that you can follow consistently. If it is not working for you, review the plan to see if it requires you to make some changes.

Here is a video created by National Debt Relief to help you learn how to budget for your household.

5 Ways A Frugal Budget Can Help You

woman showing her handPeople have been trying to change into a frugal lifestyle but unfortunately, it is not always successful. A lot of them try to make it work but it is just something that they cannot accept. Changing from extravagance to frugality is not the easiest transition to make and you may find yourself fighting it all the way.

It is true that living on a frugal budget is tough, but there are circumstances when it proves to be very beneficial. Aside from helping you reach your financial goals, you can benefit from various lessons that it can teach you. It just takes a certain level of commitment and discipline to make the change bearable.

5 lessons you can learn from frugal living

It could help you accept this necessary change if you know and understand what you can get out of it. Sometimes, the sacrifices are easier to do if you know that the frugal budget can benefit you. Most of what you will learn can help you practice the right money management skills. Here are 5 specific lessons that you can get out of following a frugal budget.

  • It teaches you how to get through financial hardships. We all know that what you do not have will not be missed and this is the key to help you survive a financial crisis. Frugality will teach you to live without extravagance and when you get used to this, you do not have to change a lot when another financial difficulty strikes. You can continue living the way you used to and your life will not be as miserable as the others. It is different if you downgrade your lifestyle by choice than by force.

  • It prompts you to be wiser when it comes to your financial transactions. As you are implementing your frugal budget, you find more reason to think about every financial transaction that you have to make. People think that to be successful at frugality means depriving yourself. This is not true. You do not have to deprive yourself of anything. On the contrary, you simply have to decide which of the expenses you used to make are more important to you. That is where you should allot your limited resources.

  • It helps you get out of debt. Some people start on a frugal budget because they have a lot of credit obligations. Frugal living will help you increase your disposable income so that you can put more money into your debt payments. By prioritizing your expenses through your new budget, you get to identify those that you can eliminate to make way for your monthly debt contributions.

  • It encourages you to develop the right financial management skills. By being frugal, you are taught to be a smart spender and you know that you have to adapt a frugal budget. These are the skills that will help you stay out of debt. You will even learn how to save your money so that you can grow your investment abilities. That is what will lead you towards the growth of your finances.

  • It pushes you to be resourceful and creative. We have mentioned how frugality is not about deprivation. Instead of spending for something, you have to be resourceful to find another way to satisfy your needs while being economical about it. If your family loves bread, you can learn how to bake one. That comes out a lot cheaper. You can learn how to be patient to use coupons. These are the things that you need to learn.

How to make frugality more appealing

Admittedly, if your heart is not set on your frugal budget, it will be very difficult to implement. It takes some getting used to but there are some tasks that you can do to help make the lifestyle shift all the more smooth. So to help you adjust, here are 3 things that we want you to do.

  • Have a goal. A goal is necessary especially when you know that you have to make a couple of sacrifices. It is the psychological way of setting up for yourself a motivational tool. Whenever you feel like your frugal budget is too hard to follow, you simply have to look back on this goal to remind yourself why you decided to go through this in the first place.

  • Change your mindset. Like it or not, you have to change your mindset about frugality. We hope that the 5 lessons we mentioned above will help you. But beyond that, you need to read about success stories about those turning to frugal living to help them improve their way of life. It is not about being cheap. You have to get rid of your misconceptions so you can truly believe that frugality is the right lifestyle for you. If you believe it enough, you will adapt to it.

  • Know what is important to you. We’ve mentioned many times how deprivation is not what you should get with frugality. It is true that you have to lower your cost of living but that does not mean you have to let go of what is important to you. On the contrary, you have to identify what is important so you can prioritize it. That way, you can spend on them and still stick to your frugal budget.

You have to keep in mind that frugality does not have to eliminate the fun things from you life. You just have to learn how to manage your money well. Try it out with a frugal budget by looking at these templates from In fact, the site has an interesting heading on it: plan, simplify, save and thrive. That pretty much sums how frugality is to be done.

Here is a video from National Debt Relief that tells you how you can make a budget.

5 Ways That Budgeting Can Limit Your Financial Growth

budget and scissorsAiming for financial growth is a common goal for all of us. Who dislikes wealth and success? Nobody. We all like to experience having a lot of money but unfortunately, we live in a society that encourages us to spend beyond our means. That’s consumerism for you.

When the nationwide financial crisis struck most of the American households, everyone looked unto budgeting to help them organize their out of control financial lives. This is one of the tips given by successful people about personal finance. You need to take control back and that requires you to create a budget plan. This will help you identify your income and the expenses that it pays off.

5 reasons your budget plan will not take your finances to the next level

But while budgeting is very helpful, your efforts should not end there. Some people make the mistake of focusing too much on their budget plan and when it fails to deliver, they end up feeling discouraged. A budget is the first step towards financial independence – it is not the only step. If you make it your only step, there are 5 reasons that it will not give you the financial growth that you are expecting.

  • Budgeting can be tedious. To tell you frankly, creating and monitoring a budget can get tedious. If you have to work hard on something, you want it produce results right? The sentiment is understandable. However, for the amount of time and effort that you will put in your budget, counting the monetary returns will not give you a satisfying result. It will point you to what you need to do but not how you should accomplish it. So focusing on your budget plan will fall short of what you expect. All of this will only end up frustrating you and discourage you from continuing with the budget.

  • Budgeting requires you to sacrifice a lot. This actually depends on how far you have fallen in terms of your financial crisis. But usually, your budget will show you the various sacrifices that you have to make in order to reach your goal. It can be expenses that you can no longer afford or entertainment expenses that are not allowed to be spent on. The reality that you will face in your budget can be discouraging – unless you see the fruits of your sacrifices. This, again, is not attainable by your mere budget plan.

  • Budgeting are wrongly thought to be consistent. This is actually a popular misconception about your budget plan. You need to think about your budget as a flexible plan. In case your money grows or decreases, you need to revise your budget to allow you to maximize the changes happening to your finances. While this is true, you have to be careful about being too quick to upgrade your lifestyle to suit the increase that you experience. When your money decreases, you need to change your budget immediately to make sure your expenses will not go beyond your new income. But when it increases, what you need to change is not your expenses – but your savings.

  • Budgeting primarily changes your behavior. When you want financial growth, you need more than a budget because it only modifies your behavior. As mentioned, it will not teach you how you will do something. It will just tell you where your money should go to. It will not teach you how to improve your cash flow – that is the main fault of your budget efforts.

  • Budgeting can give you a false sense of complacency. As you continue to use and implement your budget, you will realize that as soon as you are able to put your expenses within your income capabilities, you get complacent. But the thing is, that is not success. It leaves you stagnant. Your budget focuses more on keeping your spending beneath your earnings. It does not teach you to earn more. That is where it falls short and that is the reason why it is not a fitting tool for financial growth.

Do not get locked in your budget

The whole essence of this article is this: do not get locked in your budget that you lose sight of the other tools that you can use to get yourself out of a financial crisis and into growth. There are other important things that you need to learn to grow your money. While budgeting is integral as your first step, you need to take more than that to succeed.

You need to learn how to save, spend your money wisely and you need to learn how to invest. The last part is key to the financial growth that you wish to achieve. Both saving and investing are actually proactive ways to help you grow your money.

We encourage you to learn more about what you can do to grow your finances by educating yourself. There are other resource websites like this one that you can utilize to learn about personal finance. In fact, we found the has a list of the personal finance websites that we can recommend for you. In the end, your knowledge will be the catalyst for the improvement of your financial well-being.

Dissecting The 50/20/30 Budgeting System

man stressed with papers and calculatorAny financial expert that you will come across will tell you to make a budget. Even if you came to them to get help for your debt, retirement plan or any other financial goal, one of the things that they will encourage you to do is a budget plan.

We all need a budget regardless of our financial condition. If you have no idea how to start, there is at least one budgeting system that can suit your requirements. A budgeting system will help you create a budget plan. The problem with a budget is it requires some work at the beginning. This is where a system will help you get started. You just have to know what your options are so you will know the tools that you will use to put some order in your financial life.

One of the systems that is commonly used is known as the 50/20/30 budget plan. It is one of the many options that you have and we will be focusing on it in this article.

What does the 50/20/30 budget plan mean?

Believe it or not, some people are frightened of budgeting. But if you think about it, the fear stems from the fact that they have no idea how to do it. Well you don’t have to be apprehensive because there is a budgeting technique that is perfect for your specific financial needs.

The 50/20/30 budgeting system simply refers to the three percentages that you need to follow when you plan your expenses. Here are the three important parts of your monthly expenses.

50% for the Basic Necessities

The first is the biggest part of your income. 50% of your net income will go to the basic necessities that you have to spend for every month. This includes your home, food, transportation and utilities. Anything that is not included in these four categories is not really a basic necessity. Argument can be made for things like clothing and shoes but these are expenses that you do not have to spend for every month.

20% for your Financial Goals

The next part of this budgeting system involves your financial goals. There are basically two main categories under this part: your savings and your debt payments. If you do not have any debts, then this can entirely be allotted for your savings. Your savings will involve a lot of sub categories like your retirement plan, emergency fund, college education, home repair/maintenance fund, etc. Any financial goal that you may have is included here.

30% for your Discretionary Expenses

The last part of your chosen budgeting system is 30% of your net income. These are also known as your lifestyle choices. These are discretionary expenses that you choose to spend on to support the type of life that you wish to lead. This is where your clothing and entertainment expenses are budgeted. It can also include gym memberships, Internet, cable, phone, childcare, pet care and other similar expenses.

As you allocate your net income, make sure that you follow the 50/20/30 priority. That means you need to spend on your basic necessities first before you spend on your financial goals. And only after the two are satisfied can you spend on your discretionary expenses.

Important rules about this type of budget program

There are various rules to follow in any type of budgeting system and these will help make your efforts as effective as possible. Here are the specific rules that you have to follow.

  • It is okay to be flexible. Feel free to go beyond the 50% and 20% as needed. If you have to sacrifice anything, prioritize in taking it from the 30% of your budget. If you have a lot of financial goals, you can sacrifice a portion of your 30% and possibly a part of the 50% – if it will not compromise the survival of your family.

  • Never go beyond the 100% total. Although you are encouraged to be flexible with the percentages, never go beyond 100%. That will be living beyond your means and it usually ends up putting you in debt.

  • Make sure that your goals are aligned with your life goals. You will be most motivated to follow your budget if it is aligned with the plans that you have for the future.

  • Use realistic figures. Your goals are important but try not to get carried away. Do not let your goals overrun the majority of your budget. Be careful when putting too much restriction in your spending just so you can reach your goals. It will only make your budget unrealistic and very difficult to follow. Use a budget calculator from sites like or to make sure you are keeping your figures real.

  • Do not forget to budget for fun activities. The 30% for discretionary expenses are meant to be bigger because we all need the break sometimes. If you budget your entertainment activities properly, you will not be in danger of overspending and you still get to enjoy the things that you love to do.

A budgeting system is there to help make your budget effort more manageable if not tolerable. Here is a video from National Debt Relief that discusses tips on how you can create a budget for your household.

Use A Budget Plan To Choose The Right Debt Solution

get out of debt keyWhen you are in debt, you can get a lot of help from debt relief programs. You have debt consolidation loan, snowball method, debt management, debt settlement, and bankruptcy. There is no shortage of solutions that you can use. In fact, your dilemma is actually finding the right debt relief option that you will use to get yourself out of your credit situation.

There is no one formula to get out of debt so you can’t just make a pick. You have to consider carefully your financial capabilities. There are online calculators that you can use to help you determine which of the debt relief programs will suit your finances best. We have a debt calculator here in the National Debt Relief website and there is also another one that we would like to recommend on the site. (IAPDA stands for International Association of Professional Debt Arbitrators)

There is another tool that you can use to help you choose the right debt solution. This will prove to be useful not just in helping you decide on your debt relief program, but it can also help you get and stay out of debt.

How budgeting helps you choose a debt relief program

Finding debt relief assistance is not difficult but it is not a process that you do not want to rush into. One of the tools that you can really utilize if your budget plan.

When you are in a financial crisis, that only means your finances are not organized. You make reckless spending choices because you have no idea how much money is coming in. Sometimes, people will get a better view of their debt problem when they start to organize their money. This is where budgeting will really help.

Not only will a budget plan help you organize you money, it also allows you to make a smart choice with your debt relief options. This is because budgeting will help you identify your disposable income. This is the money left of your income after you have removed your basic expenses. Anything left can be put into your savings or your debt payments.

In choosing a debt solution, you want to consider the following scenarios.

  • If you have more than enough money to pay off your debts comfortably, you can select the snowball method. This is simply restructuring your payment plan so you pay your priority accounts. Ideally, you want to experience an early success to it is best to prioritize the debts with the lowest balance. The idea is to pay the minimum for all your debts while putting more money into your priority debt. As you notice, there is no lowering of payments or debt reduction here. That means your disposable income must be able to afford the usual debt payments plus a little extra to make this solution work.

  • If you just have enough money to pay your debts and basic needs (or you only have a slight deficit), then you can opt for debt consolidation. This is the payment method that will help you get a lower monthly contribution. It also helps you combine your payments so that you will not have a hard time monitoring your payments. Although this is okay for people who have a slightly less disposable income than the first group, it will still require you to pay the full amount of your debts, albeit over a longer period.

  • If you just have enough money for basic needs and only a little left over for debt payments, you need a debt reduction. When you need to reduce your debts, the perfect debt solution for you is debt settlement. In this program, you will convince your creditor that you are in a financial crisis. If you just have enough for your basic needs, this may be true. You want to make your creditor agree to a settlement agreement wherein you will pay only a portion of your debts. Anything that is not paid will be forgiven. This is great for people who have a very small disposable income left after expenses.

  • If you do not have enough money for both basic needs and debt payments then your only option is bankruptcy. When you can barely spend for your expenses much less for your debts, then this is what you have to choose as your debt solution. You will either liquidate your assets in Chapter 7 so that the money generated will be used to pay off your debts or you will be subjected to a repayment plan in Chapter 13. Both of these will pay only a portion of your debts and the rest will be discharged.

How to determine the disposable income in your budget

All of these choices can be easily made as long as you know how much disposable income you have. The only thing that you have to do is to create a budget plan first. If you haven’t created one before, you can download the free budget planner worksheet that is available in this site.

There are two important factors that will give you an accurate disposable income.

  • Net income. It is important that you get the income after your taxes and other mandatory deductions. Use the average amount that you get in your bank account.

  • Complete list of expenses. You should also take time to really jot down the expenses that you spend for every month. Do not leave anything out.

Be careful with these two because it can affect your disposable income – most of the time, it could fall short. If you base your debt relief choice on an amount that falls short, you will encounter problems along the way. Usually this problem stems from your inability to commit to the payments that you promised at the beginning of the program.

If you find that you need to grow your disposable income, check your budget plan and see if there are expenses that you can let go of. If you have exhausted all possible cutbacks, you can look for ways to increase your income.

Financial Plans That You Can Use In Money Management

calculatorYou can never be too cautious in life. Whenever you make a financial decision, you have to know that it can really change your life. Whether that is for better or for worse will depend on the current situation that you are in and the consequences of that particular choice that you will make.

Since your financial decisions can alter your life, it is only right that you plan for it. No one ever got into trouble for planning. When you make this your first step in any endeavor, you get to think and foresee the results that you want to happen. It enables you to prepare for any event that could ruin your chances of reaching your goals. Not only that, it allows you to align it with all your other goals in life.

Different plans that can keep your financial life organized

Fortunately for you, there are different financial plans that you can use to help make your money organized. Even if you do not have any goals at the moment, keeping your financial life organized will still be beneficial for you. At the very least, it will help you prepare for any goals that you can come up with in the future.

Of all the plans, the most generic that you will need is a budget plan. This will give you a general overview of the money that comes into your pocket and the expenses that you use it on. The main purpose of your budget is to make sure that your expenses are not exceeding your income. In case your income is not enough, you can choose which expenses must be cut back on. That is because the budget plan shows the priority expenses that needs to be funded in order to keep yourself from financial trouble.

From this plan will emerge a couple of other financial plans.

  • Spending plan. This is the more detailed expenses list that is indicated in your budget. Having this plan will help simplify your budget because it only has to contain your spending categories. This spending plan will help you jot down the details – especially for your cash expenses. If you have a food category, this spending plan will show the number of eggs, bread, meat and other products that you bought. If anything, this will help you compare prices of past purchases.

  • Payment plan. When you are in debt, a payment plan will help you in prioritizing which debts must be paid first. It will also contain the due dates and the different accounts that you have to finance every month. The idea is to keep yourself from missing any payment because that can end up being costly. You will waste more money on penalty charges.

  • Saving plan. You can also create a saving plan for all the things that you want to build up funds for. It can be for the major events in your life like marriage, the children’s college education and retirement. It can also be big purchases that you want to make like a car, or your home. It can also be that business that you have always wanted to start.

  • Investment plan. When you want to grow your money even further, you can set up various investments to diversify your sources of income. You want to keep track of everything to see how much you are actually earning. It will show you if one investment is earning more than the other. That will help you make better decisions about where you will put your money so its growth can be maximized.

If you are unsure about the type of plans that you can use in your unique financial situation and goals, you could get help from a financial planner. It is advised that you get a professional that is duly certified by the Certified Financial Planner Board of Standards, Inc. You can learn more by visiting their website at You can also do your search through reputable associations like the FPA or Financial Planning Association.

Benefits of financial planning

Planning is always a good thing and there are various benefits to it. Your finances can really spiral out of control if you are not careful. Things have a way of going wrong and you want to be organized to keep that from happening. And even if something happens, you can easily find a way to put things under control.

Financial planning for your life decisions will keep you from making choices that will put you farther from your dream. Not only that, it will keep you vigilant about anything that you may be doing wrong.

Admittedly, all of these plans can be tedious. However, this small sacrifice can get you the following gains:

  • Allows you to monitor the condition of your finances.

  • Aids you in making the right financial decisions.

  • Tells you which expenses will support your life’s goals.

  • Instructs you on how you can achieve your goals.

These are only a few of the things that you will get for being organized. Most importantly, an existing plan will give you the convenience of identifying how to make revisions as your life situation changes.

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