Why Personal Budgets Scare People

There are two main reasons why personal budgets scare people. And if you don't have a personal or household budget already, it's likely due to one of these two reasons...

• You are afraid to know the truth about your financial situation
• You are afraid that if you prepare a personal budget (and have to stick to it), it will suck all the enjoyment and fun out of your life.

Are You An Ostrich When It Comes To Personal Budgets?

It's much easier to fool ourselves into thinking that "things aren't so bad" with our finances when we don't take the time to actually write down what we earn, what we spend, what we own and what we owe. In our heads our expenses and debts are always less than in reality, and we tend to overestimate our income earning ability and net worth. In fact, most people tend to underestimate their monthly expenses by as much as 10% to 20% (or more) when asked to come up with a figure off the top of their heads.

Ignorance may be bliss in the short run, but if you are struggling financially, and you know deep down that you are continuing to dig yourself further and further into debt, sticking your head in the sand will only make matters worse. To fix the problem you need to face reality, and a good start is to do these two things:

1. Prepare a "snapshot" of your financial picture. In other words you need to figure out what your net worth is. Add up all of your assets (house, car, retirement and savings accounts etc.) and then add up all of your debts (mortgage, car loan, credit card debt, student loan debt etc.). Subtract your debts from your assets and you have your net worth.
2. Prepare a family/personal budget. Take the time to do a thorough budget. You need to figure out exactly where your money comes from every month and where it goes, down to the penny! You must do this if you want to get out of debt, and/or start to save for a home and retirement. And the longer you keep telling yourself that "things aren't so bad" the worse things will get.

Personal Budgets = A Life Void Of Enjoyment

It is actually quite the opposite actually, but most people who are not living their lives on a budget seem to think a budget equates to a boring life. A budget does not mean that you can't go out for dinner and a movie, take a vacation, buy a big screen television, or a new car. But, it does make sure that when you do those things or buy those things...

you can afford it.

Believe me, when you sit down in front of your big screen TV, or you're sitting on the beach on your vacation, you will enjoy those moments a lot more if you paid cash for them, rather than putting them on your credit card and paying them off over the next 10, 20 or 30 years. And if you live your life on a budget, not only will you enjoy the things your money buys you more (not the credit card company's money), you will be able to afford to have and do more things that bring you happiness.

When you think about preparing a budget, don't think about all the things that you won't be able to have or do, rather think of all the things you will be able to afford in the future because of your budget.

Personal budgets give you peace of mind and happiness, and you can't put a price on that.