Downfall #1: You Could End Up Relying on Your Credit Card
If you don’t budget your money properly, then you probably don’t have enough money set aside for emergency expenses. So, what do you do when you need to get your car fixed, or you have to buy a new suit for a job interview? You turn to your credit card.
That wouldn’t matter so much if you only did it on occasion, but most people fall into a credit trap that encourages them to accumulate more and more debt. That explains why the average household had nearly $16,000 in credit card debt as recently as December 2011.
Downfall #2: You Can’t Save as Much for Retirement
When you have a budget that sets aside money for long-term saving and investment goals, you can afford to live your current lifestyle after you retire.
Without a budget, that’s unlikely. You might get a little help from your employer’s retirement package or your Social Security checks, but those won’t let you maintain your current lifestyle.
If you don’t budget, you could continue to work long after your peers retire.
Downfall #3: You Can’t Afford the Car You Want
Arrigo of Palm Beach Used Cars has plenty of vehicles with affordable prices, but they’re only affordable for people who know how to save money. People who don’t follow budgets don’t usually have a few thousand dollars sitting around that they can spend on used cars.
You can always rely on financing, but you still need a down payment. Without a sizeable down payment, you’ll end up spending more money on interest.
Downfall #4: You Can’t Afford Your Dream Vacation
When you live life without a budget, you never get to set financial goals that let you do the things that make living fun.
Without a budget, you don’t know how much money you can set aside each month to pay for your dream vacation. Instead, you end up spending all of your money on things that don’t matter. Even worse, you end up spending your income repaying the credit card company.
If you want to get the most out of life, you have to set a budget that lets you do more with your money.
Downfall #5: You Can’t Help Your Kids Succeed
You’ve undoubtedly heard about how distressingly fast tuition rates are rising. Families that follow strict budgets can plan for rising education costs by setting more money aside each month.
If you don’t have a budget, then you don’t even know how much money you can afford to set aside. That means a lot of kids will have a financial head start on life while your children struggle to pay student loans.
It could even mean that your kids have to move back into your home after graduation, especially if they graduate during a period of high unemployment.
What other downfalls do you see for people who don’t budget properly?
I have had to cash out a 403(a) plan from my previous work when financial times were hard before. I spent over 12 years building that thing up and it was one of the hardest things I have ever done to cash it out. I would almost put that as downfall #6 of not properly budgeting and what funds you might have to tap into to pay the bills.
That is unfortunate, the best thing that you can do to avoid this is to open a roth IRA to supplement retirement funds in the future. In addition to this in an emergency you can always use the Roth IRA contributions you made without penalties before using a 403b. The only thing you should consider with a Roth IRA, is all gains are taxed and have penalties. Thanks for the comment.