While being under budget is generally a great idea, there are some situations where it’s essential. It could give you a critical financial cushion or may make pursuing a new goal easier. Here’s a look at four times in life when being under budget is the best budget.
4 Times in Life When Being Under Budget Is the Best Budget
- You’re Living Paycheck to Paycheck
If you’re living paycheck-to-paycheck, being under budget should be your goal. By spending less than you earn, you can create a buffer. Plus, it can reduce your stress about making ends meet.
In this situation, one of the easiest ways to ensure you’re not outside of your budget is to round up your costs. Look at your expenses and update your budget by rounding them all up to the nearest five dollars. Then, use those amounts to plan your spending, not the balance in your account.
- You Don’t Have an Emergency Fund
If you don’t have any money in an emergency fund, being under budget gives you the opportunity to create one. As with the point above, you can make small changes – like rounding up – to create a financial cushion.
A straightforward way to make this happen is, after rounding up, determine how much money is still in the account on the day before payday that isn’t explicitly allocated to an upcoming expense. Then, move it to a savings account. Even if it’s a small amount, it’ll add up over time.
- You’ve Got High-Interest Debt
Being under budget when you’re also dealing with high-interest debt can help you pay those accounts off faster. By spending less, you can direct more money to your high-interest debts. Along with reducing the amount of interest you’ll pay, it can help you eliminate a cumbersome monthly bill. Plus, it may boost your credit score, which is a nice bonus.
- You Want to Make a Major Change
A variety of life changes can shake up your budget. For example, changing careers could alter your income, having a baby increases your costs, and buying a house or moving to a new rental alters your housing expenses.
If you want to make a major change, staying within your budget or a little below now could help you determine if the financial impact is manageable. Plus, it could help you create a financial cushion to support the transition, ensuring it doesn’t turn into a financial hardship.
Can you think of any other times in life when staying below your budget is the best choice? Are there situations where aligning with your budget (or even exceeding it) makes more sense? Do you have tips that can help someone stay under budget with greater ease? Share your thoughts in the comments below.
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