If you’re like me, you’ve probably lived your life at some point or perhaps you still live without a budget? You know how much you earn, you have an idea of how much you need for bills and expenses, the rest you refuse to track?
Well, a lot of us work hard to earn a living and it’s fair to say we should make sure we spend the money we earn wisely, hence the need to budget. Once you get yourself started, you’ll see it’s actually a good way of seeing at a glance what you have coming in, what’s going out (and what that money is paying for). AND, any leftover money should be put into savings, right? See my previous article re ways to start saving.
Now, before we get into the exact reasons or benefits of budgeting, let’s consider what will happen if we’re not tracking income and expenses. We all know, it’s easy to spend more than we expect, so, without a budget, we can end up spending more than we’re making at any given time. Should this continue, we could find ourselves in debt or adding more to debt.
SO, having a budget gives us more control over where we want to really spend our hard earned cash. We know there’re areas we have to spend on, but it’s nice to have some money to spend on areas we want – could be a holiday, maybe dinner and movie once in a while, or whatever you fancy. It’s nice to have a choice, right?
Now, let’s get into it. What are the benefits of budgeting?
#1 Tracks your expenditure
With a budget it’s easy to track your finances. You record total monthly income vs your expenditure, starting with those bills (grrr right?), mortgage/rent, car payments (if any), utility bills, higher purchases, grocery etc. What’s left after all the bills are paid is your discretional income, and this is where it can also get messy if you don’t budget.
#2 Helps You Identify Things You Waste Money On
By recording every expenditure item, you can easily identify areas you’re wasting money on. This is where you can reconsider some things – could be Netflix you rarely watch coz you work long hours, or a magazine subscription to something you no longer read. Either way, going through your expenses and reevaluating will help.
#3 Allows You To Be Proactive About Savings
Saving money without a budget is hard. We usually have the best of intentions around this but somehow our needs/requirements are more than what we have, right? Suddenly at the end of the month there isn’t anything left.
A budget gives you a chance to be a bit more proactive. Once you know how much is left after all those “have to” are paid, you can decide on your savings. Set aside some money at the beginning of the month, even if it’s just $20. Include it in the budget as a regular expense, and this will help you stay on track. Might be a good idea to open a separate savings account so you’re not tempted to spend it.
#4 Ensures You’re Living Within Your Means to Avoid Debt
A budget will ensure you’re not spending more than you’re making, otherwise you’ll be in major debt.
Motivated enough to budget? Would love to know what other benefits you found, if any…