When Kumiko Love graduated college, she had $35,000 in student loan debt and more than $21,000 in credit card debt, despite working full-time throughout college. She had made the mistake of accepting more financial aid than needed. Struggling with self-confidence issues, Kumiko used that money to get her nails done, go to tanning salons and visit expensive hair salons.

“To compensate for these feelings, I used leftover financial aid to spend money that wasn’t mine. Whenever I was feeling sad or depressed, I would go to the mall and buy clothes,” Kumiko explains on her popular blog, The Budget Mom.

“I felt like I was fixing my outside appearance, but I still hated myself on the inside.” 

After Kumiko started her job in the finance industry and her son James was born, she knew something had to change. She was able knock out $77,281 in debt in eight months thanks to budgeting.

Why You Need a Budget

The now accredited Financial Counselor and blogger tells us whether your goal is knocking out student loan debt or saving for college, a budget is key.

“A budget is essential for coming up with a plan that allows you to use your income in a way that is important to you. If your goal is to save for college, you need to know how much leftover income you have to put towards your goals,” Kumiko says.

“A budget will allow you to see where you can cut or decrease expenses so you can pay off your student loan debt faster. It’s all about creating a plan for every dollar.”

When it comes to tackling student loan debt in your budget, Kumiko says first know the type of student loan debt you have. “It’s really hard to come up with a plan to pay it off if you don’t know all of the details,” she says. “Once you know that information, come up with a plan that will keep you motivated.”

Kumiko explains that budgeting is all about finding dollars you didn’t know you had. “Even with a budget in place, there is a good chance you can free up even more income to use for your goals,” she says. The first step – start by tracking your spending. “You will be amazed on how fast small unnoticed purchases add up.”

The second step is to look at your monthly bills and start doing investigative work. Kumiko recommends calling your lenders and bill companies and ask for a cheaper alternative, or eliminate monthly expenses you no longer need.

Need help creating a budget? Quicken is a budgeting software that allows you to connect your accounts and automatically categorize spending. Create a personalized budget and track and manage your spending. 

Common Budgeting Mistakes 

Studies suggest that only about 41% of Americans are using a budget. Why is that number so low? Kumiko says a lot of people mistakenly think a budget is restrictive.  “Budgeting is actually one of the most freeing things you can do. You get the chance to have real control over where your dollars are going and that’s huge,” she says.

“They think they will have to live on this ramen and water type lifestyle. They are afraid of giving up the lifestyle they are currently living. A budget allows you to free up money to spend guilt free on the things that matter to you,” Kumiko says.

The budgeting expert says one of the most common mistakes that people make when creating a budget is that they base it on what they want to be spending instead of one based on realistic spending.  

“Before creating a budget, you need to know where your dollars are going currently,” she says.

“Next, they try to set and achieve unrealistic budget goals. For example, if you are currently spending $1000 on food every month, have hopes of decreasing that, and set a budget for the following month of $200 a month, you set yourself up to fail from the beginning.”

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