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I know some people hate it, but you’ll be happy to overlook the inconveniences once you experience the benefits of budgeting.
How faithful are you at sticking to a budget?
It may seem difficult at first, but once you get the hang of it, you’ll realize budgeting can be fun and easy to do.
Did I say “fun”?
Yes, budgeting can be fun.
It doesn’t have to be a painstaking activity that deprives you of the simple joys in life. It also doesn’t have to be a restrictive endeavor that sucks the happiness out of you.
Quite the opposite actually.
Budgeting is not the enemy.
Rather it gives you the means to enjoy life.
To buy things, to pursue worthwhile experiences, and to provide for your family.
Budgeting is simply putting your money in places that yield the most benefits not only to you but for your family as well.
You have the power to tell your money where to go.
That’s the basic idea in budgeting. Quite simple and straightforward, don’t you think?
Now here’s the catch. The hardest part of it all is making your plan work and keeping with it month to month.
Do you think you can do it?
To be honest, everyone can do it.
It may require a lot of discipline and willpower; the determination to put away money into an account for some specific or future use.
But here’s the cool part. Once you’ve seen or experienced the benefits of budgeting, it gets pretty easy.
In fact, you get addicted to the advantages of budgeting that setting aside money becomes automatic. It becomes part of your lifestyle.
Why do we budget?
There are many reasons why people budget their money.
Perhaps they are working their way out of debt. Probably they’re saving up money for a big purchase like a house or a car. Or maybe they’re setting up a college fund for their kids.
So what’s the main reason to use a personal budget?
Budgeting, in simple terms, is about creating a plan on how to spend your money.
It allows you to identify in advance where your money goes.
If you don’t have enough, you can adjust your budget plan accordingly, and that is the good thing about it.
With a personal budget plan in place, it lets you see the big picture of where your money is heading. By creating a list of spending priorities, you can see how much money you’ll have for your other expenses.
A good budget plan will stop you from overspending. It acts as a guide so you get to live within your means. A lot of people tend to spend more than they earn, and they don’t even realize it.
Most importantly, a good budget plan will stop you from sinking deeper into debt.
Making a budget entails two things: forecasting and planning.
Are you ready to create a budget?
There are two things you need to do when coming up with a good budget.
You start with forecasting.
Get a good feel of your finances. Map out all the monthly expenditures you have to make for the next six to 12 months. This includes spending on utilities, groceries, house and car payments, entertainment and leisure, etc.
By doing this, you can see the areas of your finances where you may be tight. It gives you the perfect opportunity to learn these things in advance and do something about it.
Proper forecasting can also allow you to look for ways to supplement the lows in your finances while managing the highs to even out your overall budget.
As a result, everything is pleasant and manageable.
Next to forecasting is planning.
This is the part where you allocate your money for all the forecasted expenditures while providing some sort of allowance for any unexpected or unforeseen spending.
Aside from the essentials, proper budget planning lets you save up on other things like a vacation or a night out with the family. Or perhaps an emergency savings account or retirement money. (Check out my article on how to make a budget.)
The big benefits of budgeting are seen in long-term financial planning.
With a realistic budget, you can forecast your expenditures and spend within your means.
It also allows you to make sensible assumptions about your income and expenses, paving the way for other long-term goals like starting a business, buying properties, or retiring.
What are the major benefits of budgeting?
Want to manage your money?
Create a budget. It’s your basic tool that lets you accomplish a lot of things with your money.
One of the big benefits of making a budget is having a detailed understanding of where you are in your finances.
It lets you see the big picture of what you can afford to spend, setting a practical limitation with your money. Thus, you avoid the grief of overspending and sinking into debt—a predicament that many of us suffer.
There are countless benefits of budgeting.
So I listed a couple of these budgets benefits that ring true to me. Hopefully, they also make sense to you.
A budget plan gives you complete control over your money.
Do you have a 100-percent hold of where your money goes?
With a good budget plan, you have full control of your finances. It lets you live month after month with reduced stress. There will be fewer worries about unexpected or unforeseen expenditures that come up.
You also get full control of your spending habits.
With a budget in place, it helps you decide whether to buy your morning coffee at Starbucks or put the money in a travel fund for your family’s next vacation.
A budget will let you focus on the more important things and sacrifice the trivial ones.
It helps you stay on track with your financial goals.
Do you often lose sight of your financial goals?
With a budget in place, you get to stay on track with your priorities. It helps you avoid unnecessary spending.
Having a budget is especially helpful if you have a fixed amount of income every month.
If the same amount of money is coming in, a budget will help you make ends meet. It becomes a matter of appropriating money on the essentials while cutting into less important expenditures.
Take the time to write down all the necessary expenditures you need to tackle every month. Once you get that down on paper, write your financial goals as well. Whatever money is left after allocating for the essentials goes to these goals.
Doesn’t that give you control of your finances?
With a budget in place, you stay on track with your finances.
You get a bigger picture of where you are in your finances.
A lot of people lose track of their finances and often left wondering at the end of every month where did all the money go.
One of the advantages of using budgets is getting a bigger and better look at where you are in your finances.
You get a bird’s eye view of where the money is coming from and how much. You also get a better picture of where it is being spent. Lastly, a good budget will give you a good expectation of how much you have at every month’s end.
Budgeting will give you a complete understanding of your money activities.
It will open your eyes to what you can afford and what worthwhile activities to pursue instead of making trivial purchases in everyday life.
Would you really want to dine out often or should you pursue investing opportunities? Or perhaps aim to lower your debt?
A good budget plan will let you understand what are the important things to consider when spending your money. It guides you on what to adjust in your expenditures to lead you in the right direction toward your financial goals.
Organize your spending the practical and sensible way with a good budget.
Do you want to get a clearer picture of where your money goes every month?
This is one of the major benefits of budgeting.
By creating a thorough breakdown of the month’s expenses, you get a better look of your spending. List down the usual monthly expenditures like groceries, mortgage, cable, internet, insurance, and entertainment.
With this comprehensive list, you can easily make out how much you’re spending on these individual monthly expenses.
Wondering why it’s important that you list down the monthly spending on these individuals services?
With a thorough breakdown, it lets you see if one bill goes up.
Just this year, I noticed our utilities went up a bit. Because of this budgeting method, we were able to see the changes and address the variance.
If you want to make budgeting efficient, make an itemized budget plan.
Your budget should include a cushion for unexpected or unforeseen spending.
What do you when you have an unexpected expense?
Do you take it out from a designated fund or do you borrow money?
An emergency trip to the hospital or unscheduled car or house repair can really take you out of your rhythm. So it’s good to have an emergency fund for these unexpected costs.
With money set aside for these unforeseen or unanticipated events, you won’t have to take it out from funds for other scheduled expenditures. Or worse, borrow money, which could only sink you into debt.
The last thing you want is having insufficient funds to cover the unexpected costs.
Ideally, you should maintain at least a thousand dollars in an emergency fund; that is, on top of any medical, car, or other insurance coverage that you may have.
With these precautionary mechanisms in place, you get full control of your finances no matter what life throws at you.
Having a budget makes talking about finances easier.
A lot of times, couples argue about money. It can be inevitable especially when the finances are tight.
But money doesn’t have to be a taboo subject.
It’s easier to talk about finances when you have a budget in place. It allows for a calmer and more effective communication about a sensitive topic.
Get the tension off of the discussion of money by having a budget into the talk. Now, the money conversation becomes fact-based.
How’s that for encouraging an honest and open discussion?
That’s a huge win for couples. All money conversations don’t have to be heated. Make it a more objective and factual discussion by having a budget in place.
A budget lets you put in a “safety net.”
Do you have a contingency plan in case you or your partner loses a job and suddenly you are living on one income?
It can be a life-changing event for your family when that happens.
Hopefully, this doesn’t happen to you, but it’s best to prepare for any contingency.
If you want to keep afloat even when the income stops coming in, set up a special fund; a safety net, so to speak. That way, when a major life event like unemployment happens, you’ll be ready.
Think of this “safety net” like a special fund for unexpected spendings like for emergency medical costs and unanticipated car or house repairs.
Ideally, you should have a “safety net” savings equivalent to at least six months of income. Although, personally, I have set aside about nine months of income into this special fund and working on getting it to a year’s worth.
Here’s to hoping you’ll never have to need this special fund.
On the other hand, you can use this “safety net” to transition from a 9-to-5 job to grow your own business.
Simply put, this “safety net” will give you the courage to take on the risk of doing something for your own.
Pay off your debt fast by allocating funds for it in your budget.
Here’s another one of the many benefits of budgeting: paying off your debts quickly.
Whether it’s a student loan or a car mortgage, there are many ways that we can go into debt.
The reality is getting into debt may be necessary. If you want to buy a car or get into a new home, you will need to sign some papers and get a loan.
Securing a loan is one thing; making sure you pay off the principal amount and its interest is another.
By creating a budget, you get a better understanding of the terms of the loan, its interest rates, and length of the obligation. Knowing these things is critical to paying it off as quickly as possible.
Looking to invest? Put that into your budget.
If you want to make your money work for you, it’s a good idea to invest. Perhaps get into stocks or contribute for your retirement.
Be sure to include your investments into your budget.
Most people have this mindset of setting aside money into an investment or retirement fund only of what’s left in a month.
Put away as much as you need into this fund, which should have the same priority as your utilities or groceries. That way, you will not skimp on setting aside money for your investments or retirement.
Have you experienced the wonderful benefits of budgeting?