In this article, discover seven reasons to budget your money that may help you look at the process in a new light.
Budgeting Stops Overspending
Spending money without thinking carefully about where it all goes can easily lead you to overspend on a monthly basis. Overspending limits your spending power in the future, as more and more of your income has to be applied to debt payments. If you are worried about restricting your spending, consider what it would feel like to have the majority of your paycheck applied to credit card payments. The stress of finding a way to pay for your everyday needs can be astronomical when most of your paycheck is already spoken for. By using a budget to take a hard look at your income compared to your expenses, you will be better able to determine when to stop spending.
Helps You Reach Your Goals
With a budget, you can move to focus your money on the things that are most important to you. Some goals to work toward may be getting out of debt, saving up for a home, or working on starting your own business. Your budget creates a plan and lets you track it to make sure you are reaching your goals. One method financial experts recommend using when trying to reach a financial goal is the 50/30/20 budgeting rule. Through this strategy, you allocate your budget according to three categories: needs, wants, and financial goals. This way, you will be setting aside money in your budget each month for your goals, typically in a savings account.
Makes It Easier To Save
People who do not have a budget tend to save less money than people who do, according to America Saves, a campaign managed by the nonprofit Consumer Federation of America. That’s because when you budget, you assign your money to do certain things. You can have money automatically transferred into a savings or investment account each month. This way, you’ll be less likely to dip into your savings each month. As you do those things, you can begin to build wealth and give yourself true financial freedom.
Makes More Room for the “Fun” Stuff
When you’re budgeting, you get to decide how much you spend in each category. So if you want to put a significant portion of your money toward leisure activities, you shouldn’t feel bad about that, as long as you are still saving and meeting your other needs. Budgeting is not about limiting the fun in your life; it’s about opening up opportunities to have more fun. And helping you worry less about the financial safety your future.
Allows You To Be Flexible
Budgeting can be flexible, in that you can move money between categories as you need to throughout the month. Generally, you should restrict yourself from touching the money you have set aside for savings, but you can adjust the amount you spend on each other category as you go. It’s another way that you can keep yourself from overspending. It also allows you to recognize issues within your spending habits and then adjust so you do not end up spending more than your means. Budgeting apps and software are great for beginners, as they can automate categories for you and then move things around based on your preferences.
Puts You in Control
Budgeting can help you gain a feeling of control over your money. It allows you to prioritize your spending, track how you are doing, and realize when you need to make changes. A budget puts a solid plan into place that is easy to follow and gives you the chance to plan and prepare for the future. It is the biggest tool you have to change your financial future, and it gives you the power to make changes starting today.
Can Be Simple
You can simplify the budgeting process by using percentages of your income for set expenses, savings, and spending money. Then you simply track the money as you utilize it. Keep at it: The first few months of budgeting are a bit more difficult as you adjust your categories to find the amounts that work for your situation. If you have a roommate, friend, or partner who is also interested in getting a handle on their finances, consider making a budget together. This way, you can hold each other accountable, making the process easier and more fun.
