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Budgeting Doesn't Have to be Too Painful

Spending more than you have can lead to financial hardship

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You have to ask yourself, ‘Do I really need it?'
- Angie Duering, retired office manager

As executive director of an intervention and treatment center for drug and alcohol use, Dan Rutt has seen time and again how bad spending habits can lead to heartache and financial catastrophe for those lacking the skills to budget their monthly earnings efficiently.

What’s most heartbreaking about such self-destructive spending habits is that, in most cases, the client knows not what he or she has done until it is laid out before them in the regional budgeting class taught by Rutt. By then, the damage can take years to undo.

So what is it that ultimately brings them to such a lowly state of financial disarray? Rutt believes it is an entitlement mentality that drives people to spend more than they can afford – often through the use of high-interest credit cards - to attain what they believe will be instant gratification. Unfortunately, that gratification is short-lived once the bills begin to show up in the mail.

“It’s amazing to me that if you borrow $10,000 and pay the minimum payment every month you are going to pay almost $60,000 over 30 years to pay off the debt,” he said.

Students in Rutt’s program are in good company when it comes to spending more than they make. Debt.org, a debt help organization, reports that of the estimated 189 million-plus Americans who carry credit cards, the average credit card debt per each household is $8,398. It gets worse. The total U.S. consumer debt sits at $13.86 trillion, which includes mortgages, auto loans, credit cards, and student loans.

All is Not Lost 

While the financial forecast is bleak for many, particularly in light of the recent COVID-19 debacle, there are ways to avoid the pitfalls that have plunged millions into unmanageable and oft-times debilitating debt.

Budgeting courses offer common-sense solutions to avoid the temptations that inevitably spell financial doom to those who fall for them.

“We show people how to build a budget,” Rutt said. “First we gather facts. How much do you bring home versus how much you spend every week? We talk about debt reduction and trying to get your credit cards paid off.

“We talk a lot about utilities, groceries, rent, and making sure you budget for them. If you rent an apartment, make sure you have rental insurance. Also make sure you have an emergency fund anywhere from 8-12 months of your salary, in case you lose your job.”

Apps like Goodbudget, Splitwise, and Honeydue help users implement such financial strategies. Utilizing these apps helps users track their spending habits in easily accessible formats, making access to their financial records a more manageable proposition.

Absent a commitment and strategy to reign in spending, however, and even the best intentions are unlikely to impact one’s future spending habits.

Is it a Want or a Need?

Retired newspaper office manager Angie Duering has juggled budgets on the home front and workplace for decades. Her primary strategy for staying in the green is being able to differentiate between wants and needs.

“You have to ask yourself, ‘Do I really need it?’” she said. “Can you find something less expensive, maybe not a name brand? Most generic store brands are just as good as name brands, and much cheaper.”

Eating at home can be a real money saver, especially for those living where growing a garden, picking their own fruit trees, or raising chickens for eggs are viable options, Duering said.

Above all else, she said, it is never wise to spend more money than you make unless absolutely necessary. For small debt becomes a big debt in a hurry.

“For a lot of people, it gradually snowballs until they are totally helpless as to what they need to do,” she said. “You’ve always got to be thinking ahead.”

A Payment in Time is Wise

Throwing windfall currency at debt – such as an inheritance or income tax refund – can save spenders thousands of dollars in interest fees, said Maureen Mohlman, who has served as office manager at a tax preparation company for more than 40 years.

Such sage advice isn’t always easy to follow, however.

“A lot of times when people get larger refunds, instead of spending it wisely by applying it to debt they go out and spend it on things they don’t really need,” she said. “It’s an attitude of ‘If I want it, I must need it.’ It takes some discipline to change how we do things.”

Buy Yourself Something Nice, Within Reason

Though setting money aside for a rainy day is essential in any budget, Mohlman recommends adding a recreation allowance to keep the plan from feeling too oppressive to maintain.

“It’s good to have some discretionary money to spend,” she said. “It’s like going on a diet. If you try to be 100%  strict on it, you’re going to fail. You need to build a bit of a reward into the budget.”

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Budgeting Doesn't Have to be Too Painful