Could Not Having A Budget Destroy Your Finances?

Making a budget is extremely important. However, many people don’t know how to make a budget, how to save money with a budget, or understand why they should have a budget in the first place. According to my article Are You Better Than Average?: 68% of people live paycheck to paycheck. 26% have no emergency…

Michelle Schroeder-Gardner

Last Updated: August 22, 2017

Disclosure: This post may contain affiliate links, meaning if you decide to make a purchase via my links, I may earn a commission at no additional cost to you. See my disclosure for more info.

Making a budget is extremely important. However, many people don’t know how to make a budget, how to save money with a budget, or understand why they should have a budget in the first place.

Making a budget is extremely important. However, many people do not know how to make a budget or understand why they should have one. Here are my budgeting tips!According to my article Are You Better Than Average?:

  • 68% of people live paycheck to paycheck.
  • 26% have no emergency savings.
  • The median amount saved for retirement is less than $60,000.
  • The average household has $7,283 in credit card debt.

And, probably one of the biggest reasons for the statistics listed above is that over 60% of people do not have a budget.

There are many reasons for budgeting, yet it seems like the majority of people still do not have one. I believe that if more people started making a budget, they could stop living paycheck to paycheck, increase their savings, reduce and/or eliminate their credit card debt, and more.

Budgets are extremely important, and I believe that nearly everyone should have one. Rich, poor, middle-class, no matter where you are financially, a budget can most likely improve your financial situation.

I’ve been asked several times why I have a budget, and some people even assume that I have money problems because we track our cash flow and spending. I’ve even had people offer to lend me money when I have brought up anything relating to the word “budget.”

For some reason, there is a negative connotation attached to the word “budget.”

There’s a myth that exists that only people who are “bad” with money need one.

However, this couldn’t be further from the truth. Considering that the average person saves no where near the amount they need in order to retire, creating a budget should be on everyone’s to-do list.

Instead of thinking of a budget as something that holds you back, you should think of it as a tool to help you reach your goals.

Note: To make things easier in this post, when I say “budget” I am talking about doing things such as (all or just one of these) tracking your spending, managing your cash flow, having a normal budget, going on a spending diet, etc. Basically, do you know where your money is going and how much money you are saving each month? To me, that means you have some form of a budget. I realize that different things work for different people, but if you don’t know how to manage your money, then you need a budget that works for you!

Related articles on making a budget:

Here is why you need to start making a budget:


1. There are many positives of making a budget.

Budgets help people manage their money better. It’s really that simple.

I’ve never heard someone say that they regret making a budget – it’s always the opposite. Often, people even say they wish they would have started one sooner.

Budgets are great because they keep you mindful of your income and expenses. With a monthly budget, you will know exactly how much you can spend in a category each month, how much you have to work with, what spending areas need to be evaluated, among other things.

Whether your budget is more traditional- writing everything down with pencil and paper, or if you are just tracking your cash flow, making a budget can be extremely beneficial.

Budgets have helped people reach their financial goals, pay off debt, make more money, retire, and more.


2. Making a budget can help you pay off debt.

Here are some great debt payoff stories:

Do you know what all of these people have in common?

A household budget helped ALL of them reach their goals!

By having a budget, the people mentioned in the articles above were able to pay off hundreds of thousands of dollars in debt and learn how to become debt free.

Yes, having a budget can actually help you pay off significant amounts of debt.

Here’s a quick summary of how one of these people felt about budgeting:

Developing a budget was the first step [to pay off debt]. My wife and I spent an entire month simply monitoring our spending without changing our habits. Why did we do this? Well, we wanted to see where our money was going.

What we realized is that our money was going everywhere. We were spending outrageous amounts of money for things that we didn’t even realize we were getting! Sure, some of it was important (food, certain bills, etc.), but there was so much that was unnecessary. The couple of dollars here and there for snacks and beverages (when we have these at home), the fast food or restaurants in place of dinner at home, or the subscriptions that we had forgotten we had that were still charging us monthly.

Making a budget completely changed this family’s financial situation, and even though they thought they weren’t wasting money, their budget showed them that they actually were.

According to NerdWallet, the average U.S. household carrying debt has $15,611 in credit card debt, and the average student loan debt is $32,264.

If this isn’t an obvious reason for budgeting, then I don’t know what is.

If you have debt, then you should definitely create a budget. A budget can help you pay down your debt quicker so that you can stop paying high interest charges.

Also, the relief of finally having your debt eliminated would feel amazing, right?


3. Analyzing your income and spending is important.

Without a budget, you may never analyze your income and/or spending, which can cause you to waste more money.

If you are spending more money that you make each month, then this is a reason to create a budget because this shows that something is not going correctly.

It’s so easy to spend more money than you make each month, these days more than ever. Part of this is because it is so easy to get approved for any type of loan (such as a car loan, financing plans, etc.), which can lead to a lot of debt.

If you find that you are spending more money than you make each month and/or you are not saving any money, then you MUST create a budget.

You won’t know where your spending problems are until you have a budget.

A budget will show you what needs to be changed. You will see exactly how much you are making every month along with all of your expenses. With a budget, you may find that you are spending too much on entertainment, going out to eat, which bills are bogging you down, and more. This will allow you to pinpoint which areas need improvement so that you can stop living paycheck to paycheck and start saving money.

With a budget, you can see where your money is going, what expenses you should eliminate, and more. You might be able to find hundreds of dollars or more in your budget each month. And, this can go a long way!


4. A budget can help you reach your financial goals.

Making a budget helps you stay on track with your financial goals.

This is because without a budget, you may spend money without thinking about how it will impact your goal progress.

There are many different financial goals in which a budget will help you reach faster, such as:

  • Retirement. This could even mean early retirement or financial independence. A budget can help you manage your money better so that you can reach retirement sooner.
  • A vacation. When was the last time you took a vacation? Budgeting can help you spend your money more wisely so that you can save for a fun vacation.
  • Debt payoff. Debt can be hard to overcome, but with a budget, you may be able to breathe again because it may help you find extra money to put towards your debt.
  • Buying a home. If you have always wanted to buy a home or make some other large purchase, a budget can help you save for something that you never thought was possible.
  • Funding an emergency fund. One of the other great benefits of creating a budget is being able to fund your emergency fund. This can help protect you in case a big expense comes up or if you lose your job.

As you can see, a budget is great because it can help you reach your financial goals. Your budget will make your goals more attainable and realistic!


5. It’s easy to start making a budget!

Lastly, making a budget isn’t difficult to do. A budget can be quite easy to create, so there is no reason not to have one.

You can create a budget with budgeting software, a pencil and paper, an Excel spreadsheet, or so on.

My favorite way to budget is by using Personal Capital. With Personal Capital, you can stick to a budget by easily setting monthly spending targets, visualizing your spending and savings, getting insights into your cashflow, seeing the transaction you’re making, analyzing your net worth, and more.

Learn more about making a budget at The Complete Budgeting Guide: How To Create A Budget That Works.

Do you think not making a budget could destroy a person’s finances? Why or why not?

Filed under:

Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

Like this article?

Join the Conversation

Leave a Reply

Your email address will not be published. Required fields are marked *

  1. Mustard Seed Money

    I’m a huge fan of zero-based budgets. Being able to tell your money where it belongs is such a great feeling. Before having a budget I felt like my money would leak out into the abyss. Now that I’m using the zero-based budget I don’t have to worry about that anymore 🙂

  2. Ember @ An Intentional Lifestyle

    I’ve looked at those statistics before, of people that don’t have budgets. I am always a bit shocked and surprised, that so many people have no idea where their money is going. It’s crazy to me. But to be honest, if I hadn’t married my husband, I’d be one of those people. So I guess it makes sense.

    So many people use the excuse that they get paid on a different schedule, it’s inconsistent, you can’t plan a budget like that…. all lies to keep from putting in the work. Just do it though. It makes such a difference!!

    1. It makes a huge difference, yes!

  3. Budget Kitty

    I totally think not having a budget could destroy your finances. We used to think that budgets were only for people who didn’t earn much or were not good at managing their money, but we ended up with some unexpected expenses and made a few poor financial decisions along the way. It wasn’t until we started following a budget that we began to turn things around.

    1. Glad you started following a budget!

  4. Good morning Michelle,

    I’m so happy to see you blogging consistently that it keeps me inspired to make healthy content marketing changes. I just want to say thanks for just being you.

    I do believe not having a budget can destroy your finances. One thing many people don’t think about is saving money for their retirement. Some people including myself are guilty of having sums of money in their hand in the moment and spending it freely without improvising. Budgeting is important because when you get to be 50 or 60 years old and look back on your spending habits, you’ll sort of start hating yourself unless you get your act together now.

    I’m glad you mentioned about credit card debt. I just paid off one credit card and in the process of paying off another credit card this week Lord willing. I’m concerned about maintaining a high credit score because this affects other areas of my life such as loans, mortgages, home equity lines of credit, and so on.

    I will tell you this much concerning budgeting. As finances slowly start to increase from internet income, I will be more mindful about creating a budget where as I a lot myself a salary and only spend so much in a period of time. I feel like such a fool in the past that I didn’t think about putting money away and spending freely. I guess it’s safe to say we make mistakes unintentionally to become better in our future judgment, right?

    I can’t be an Internet millionaire and spending money all over the place. Then I’ll have no money to retire on. Perhaps you’ll post more blogs in the future and offer some budgeting techniques I can learn from. Thank you for this thought-provoking post, Michelle.

    1. I’ve blogged consistently since pretty much the very beginning 🙂

  5. I can’t imagine not having a budget. It’s saved me so many times, and has allowed me to pay off debt quickly! EVERYONE needs a budget!

  6. We’ve never had a detailed budget either. Different things work for different people 🙂

  7. Kim

    You made such a good point when you talk about the “negative connotation” of the word budget. I notice when I say that I did not have the money for something, that my friends often offer to “help.” But what I really mean is that I have other financial priorities, and do not choose to put money towards other things right now. It’s hard sometimes to say I don’t have the money for things, but unless I want to change my budget, it’s what I have to do.

    1. Yesss! I completely understand.

  8. Mrs. Picky Pincher

    I think there are two camps that don’t believe in budgets: the first are people who just don’t know they need one, and the second are people who consciously “un-budget.” I believe 95% of people need a budget. The only way you wouldn’t need a budget is if you’ve already achieved FIRE and have so much money and so few expenses that wasting time on a budget would be silly. Since most people aren’t on this level, you need a budget!

  9. Suzy C

    As someone who is approaching this from the 50 something age bracket I cannot emphasise enough how important it is to plan for your retirement. Due to some bad planning and some less than ideal circumstances my husband and I find ourselves having to take drastic action to try to pay down debt. We used to live a comfortable middle class lifestyle. We are now having to adjust to frugal living and I’m taking on two jobs to try and get on an even keel. It’s incredibly worrying and stressful. I may write a blog post about this as I feel it’s so important. Thanks for the inspiration Michelle.

    1. Sounds like a great blog post.

  10. I don’t know why “budget” has so many negative connotations! In general, it seems as though those who DON’T have a budget are actually the ones who have money problems. We have been using YNAB for a while to track our finances, and it’s worked well for us. I can’t imagine not using it. When you have to “put in” purchases, it really makes you think twice about them.

    I’ve been asked a lot lately how we’re able to do the things that we’re doing (just got back from Hawaii, staying in Florida for a few months, etc.) and the honest SIMPLE answer is having a budget. We prioritize our spending and are able to do what we want because of it.

  11. I used to hate budgets and budgeting, but then I started using You Need a Budget (YNAB), and found it SUPER easy to use. I was shocked at how much I spent on food and drink, and even though I’ve made great strides, I still spend too much in these categories. I love being on a budget cause I truly know where my money is going! It’s silly people think the word “budget” means you have money problems; it just means you’re being smart! I’m so glad you wrote this post and pointed that out.

  12. We do have a budget, but it’s not detailed to perfection.
    We always make sure to pay rent, bills, etc. That’s top priority (debt used to be too, until we got rid of it – yay!). With what’s left, we try to be as frugal as possible and also save, save, save 🙂

  13. The budget has helped me to stop living from pay cheque to pay cheque. Before I made one, it felt that my money was disappearing into nowhere. After finally analyzing my expenses, I realized that I ate out way too much. Eating out expenses were almost 25% of my monthly income! Analyzing your expenses, the first step to budgeting can really open your eyes to what’s going on in your financial life

  14. William @ Business Education

    When I was working as a student, I was one of the 68% of people who lived paycheck to paycheck. I know a lot of my friends had no idea how to make their own budget. Everyone always thinks that a budget is only for those who aren’t financially stable – not true for me, since even today I use one and I don’t know how I’d manage my finances without planning it out. Most importantly, having a budget let’s you have a little cushion for unexpected emergencies (which hopefully never happens, but best to be prepared). Agree with this post 100%!

  15. Kris

    We never had a monthly budget where we had to spend a certain amount for each category. If we spend a lot on groceries for a month, for example, we just made sure to cut down on it the next month and made a habit of it. We stop spending or cut down on items we really didn’t need. That was our way of budgeting and it’s worked out for us.

  16. Kaitlynn Marie

    I’m hoping this go-round will work for me. I’ve tried budgeting in the past and I just fail miserably. But I cut out a few things I didn’t need, and so hopefully I’ll be able to keep track of where my money is going. My current plan is a car by the end of the year, and I think a budget is the only way I’ll attain that goal.

    I’m in love with your blog and I appreciate every post 🙂