Why a Tight Budget Will Make You Better With your Money – 6 Benefits

6 Reasons a Tight Budget Makes You Better With Your Money

For most of our married life, my husband and I have had a very tight budget.

When we were first married and living in an area with a high cost of living (the near suburbs of Chicago), we had $24,000 in student loan debt and $10,000 in credit card debt from getting my Master’s degree and a year of working adjunct until I could get a full-time job.  My husband was not working (he was a graduate student and was volunteering in a business related to his field), and I was making a mere $34,000 gross a year.

Every single purchase was carefully analyzed.

Paying for Christmas presents required a few months’ worth of careful savings, and we made our money stretch by carefully shopping deals and discounts.  We spent a lot of time at home, and our entertainment came from the library for free.

About five years into our marriage, I had almost doubled my salary, and my husband was bringing in a small income as a Ph.D. teaching assistant.

We didn’t have to be so careful with our money, so we weren’t.  We bought things we didn’t need (that we later sold at a garage sale), and we went out to eat several times a week.  Besides having more material things, we were no further ahead than we were at the beginning of our marriage.

And now that we have three kids and I have quit my full-time job to raise them, we’re right back to a super tight budget, just as we were when we were married.

Only this time, I welcome the super tight budget because it’s teaching me to be a better money manager.

The Benefits of a Tight Budget – 6 Reasons It Will Make You Better With Your Money

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7 Reasons We Have Trouble Sticking to Our Budget

Reasons We Can't Stick to Our Budget

Every month, I diligently write out our budget and track how we spend our money. 

Most months we stay close to our target budget.  However, there are some months, especially the winter months when we have a number of expenses due at once, where we struggle to make ends meet.

I’m sure you’ve experienced this as well.

If you struggle with your budget, you’re not alone.  Turns out, there are many reasons why most of us spend more and save less than we should.

Here’s Why We Have So Much Trouble Sticking to Our Budget

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Your 4 Step Guide on How to Stop Living Paycheck to Paycheck

Your guide on how to stop living paycheck to paycheck

For more than a decade, wages, in real terms, have been pretty much stagnant.

Even as productivity has increased among the middle class, wages have failed to improve to match.  So, even though the recession has been over for more than five years, many Americans still feel the pinch.

Recent research suggests that more than 25 million middle class Americans are living paycheck to paycheck.

According to a study from the Brookings Institution, 66 percent of the American households living “hand-to-mouth” are families with median incomes of around $41,000.

This means that, even though there is an economic recovery underway (albeit is rather lukewarm recovery), millions of Americans — many of them with jobs — aren’t reaping the benefits of the recovery.

When you’re living paycheck to paycheck, you don’t usually have liquid assets, such as savings accounts.  The research finds that these Americans do have homes and retirement accounts, but, even then, the median net worth is still only $41,000.

To get beyond living paycheck to paycheck, the Americans in this study needed an income of $51,000 a year, and had assets of $116,000.

But that doesn’t mean that you are doomed to live paycheck to paycheck, no matter how much (or little) you make.  You can stop living paycheck to paycheck, if you are willing to make changes to the way you handle your budget.

Here’s How to Stop Living Paycheck to Paycheck

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Just Because You Can Spend More, Doesn’t Mean You Should

One of the things I heard a lot when my husband and I were shopping around for a new house a few years ago was this: You can borrow this much!

This much invariably turned out to be more than we were strictly comfortable spending.

One lender (specializing in no-doc loans for the self-employed) was even prepared to approve us for a mortgage loan with a payment that would have amounted to about 42% of our monthly income.  This was in the heady days just before the mortgage market crash and the financial crisis.

I wasn’t entirely sure I was ready to buy a home, but I knew I wasn’t comfortable with a payment that large.

Home buying isn’t the only time you need to be guarded in your spending decisions.  You might be told that you can “afford” a certain monthly car payment, or think that it’s easy to buy a brand new electronic device if you put it on a credit card and pay only the minimum payment.

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How to Get Your Spouse More Involved in the Family Finances

In many marriages, there is the financial geek who enjoys setting the budget, paying the bills,  and managing the money. 

Often the other spouse wants no part of the finances.

While this is not always the case, it is true for many marriages.

This arrangement may work well for awhile, but over time, the spouse who handles the money may feel burdened by being the sole financial executor, especially if the family struggles with debt.

While the financial geek may never get his or her partner as excited about finances as he or she is, there are some ways to get your spouse involved more.

How You Can Get Your Spouse More Involved in the Family Finances

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Budgeting for Christmas Shopping Before it’s too Late

Shopping for christmas goodies

Yes, it is only just Fall and the leaves are barely starting to change color but before any of us realize it, the snow will be on the ground and Jingle Bells will be playing at the mall (OK, the holiday music will start once Halloween is over).

Budgeting for Christmas shopping now may sound like a chore but it can be the life line you need to avert debt.

Typically when a person goes Christmas shopping and there is no budget, then this gives the illusion of having no limits – and no limits often leads to January credit card bills that hurt.

Designing a budget helps you to avoid that steep downhill in January; and this helps to keep the happiness of the Christmas holidays lasting well into the new year.
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Can’t Pay On Time? Change Your Due Date!

Way back in the dark days when my credit card debt felt like a ball and chain around my neck I would have problems paying my credit card bills on time.

And man, was I so close a lot of those times!

I’d miss the due date by a day here, three days there.  See, my budget was timed badly such that my paycheck and my credit card due date were within days of each other (I was living paycheck-to-paycheck for a while).  By the time I could get my bills out they would already be late.  You can always ask the credit card company to waive a late fee but I had too many to ask anymore.

One day I found out I could ask the credit card company to move my due date.

“They would do that,” I thought?  I mean, why would they work with me since I owe them money?
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