Why It's a Bad Idea to Compare Your Finances to Others
When meeting with a financial counselor, many people ask about how their finances compare to others’ situations. None of our financial counselors can answer that with a definitive answer. Even when people are in the same income bracket or share a similar problem (e.g. credit card balances), every individual and family is different.
It’s important to budget, but it’s also important to be realistic.
First things first: create a budget. Determine what your monthly expenses are compared to your income. If you find that there are some areas where you might be overspending, don't make any drastic changes until you look into it more.
"Why are we spending more on food than other families?"
There are a variety of reasons that your budget will be different from someone with a similar lifestyle and/or income to you. Your daughter might be allergic to certain foods; your kids are growing like weeds so you have to buy them clothes regularly. Or maybe you are on a strict diet due to a medical condition. And we all know fresh, healthy food costs more than processed foods in the inner aisles of the grocery store. So if you're spending more than the "typical" family in certain areas, there could be many logical reasons why.
Make reductions as needed and where feasible.
If you did find spending categories where you think you're overspending or you're just not sure, break down where that money goes. Sticking with the food example, if you/your family are dining out on a regular basis and/or buying coffee or snacks on the fly, that's a good place to start cutting back. Making the most of groceries — cooking, packing lunches, bringing coffee/snacks from home, etc. — is the best way to get the most bang for your buck. Dining out is expensive and adds up quickly.
"I don't think I need to cut back."
Even if you're making it each month, it's always smart to build up savings. Almost half of Americans couldn't afford a $400 emergency right now. Or, what if there is a job loss in your family? Planning ahead and building up your emergency fund is crucial to avoid a future financial crisis.
So long story short, our finances and budgets are like snowflakes... every one is different. Don't compare your finances to others. Do what's affordable and needed for you and your family while saving for emergencies.
If you have credit card balances and that's what is holding you back from really enjoying life, LSS Financial Counseling can help. Call us at 888.577.2227 to schedule your free financial counseling session. Or click GET STARTED for your free online session.