Budgeting is the tool that gives you the most control of your finances. This is because when you budget, you get the most comprehensive view of your overall financial health.
Maybe the thought of spending your time figuring out and managing your budget isn’t your idea of fun.
But know this: budgeting puts financial control back into your hands so that you can make informed decisions about your money and your financial future. When you take care of your “needs” and prepare for life’s unexpected bumps, you can enjoy your “wants.”
Not convinced a budget holds this much power? Let’s dive into exactly how a budget is going to make your life significantly better.
It prepares you for unexpected expenses
Didn’t see that coming, or that…or THAT! When it comes to your expenses, this isn’t what you want to say. But let’s be honest, surprise expenses pop up often. There’s no such thing as a full month without unexpected costs. When you budget regularly, you know that every month is full of unforeseen expenses, so plan accordingly.
Each month set money aside for life’s “emergencies.” Surprise! - looks like your daughter needs braces this month. Uh oh - the dryer stopped working and needs to be repaired. What’s that sound?! – better make an appointment to get the car checked. It never fails, life has a way of surprising you.
Do yourself a big favor - allocate money in your budget for life’s costly surprises. That way, you won’t have to dip into your savings and sacrifice your long-term financial goals.
It shows you how to live within your means
A budget shows you your spending habits – the good, the bad and the ugly. This is where you assess the expenses you NEED (non-discretionary expenses) and the expenses you WANT (discretionary expenses).
Your needs are things like gas, groceries, mortgage/rent, water, etc. There’s no getting around these expenses because they’re essential to your life.
Wants, on the other hand, are luxuries. Things that can make life more comfortable or enjoyable – and we all “want” that!
Wants include things like:
- Eating out
- Extra shopping
- A gym membership
- Streaming service subscriptions (yes, those are a luxury even during a pandemic).
As you look at everything you spend your hard-earned money on, a budget allows you to rethink your spending habits and align your focus with your financial goals.
This brings us to our final point, and arguably, the best part of this blog…
It allows you to pay yourself and reach your financial goals
Now that you have a clear picture of your financial portfolio, what is it you’d like to do?
Pay off all of your debt?
Build solid retirement savings?
Save up for a down payment on a house?
Once you know what your goals are, it’s easier for you to say no to purchases that may offer instant gratification but keep you from reaching those goals.
Those new shoes won’t help you pay off your debt.
That shiny new car with all the great features means retirement is further away.
And that vacation to Hawaii delays your down payment for a new house.
It’s far easier to keep your eye on the prize when you know what your financial goals are and you’ve made a plan in your budget to get you there.
Of course, these are only a few of the many reasons you need and want a budget. The list of ways this habit will improve your life, goes on and on…and on. The only thing that can stop you from taking control of your financial life, is you. So what are you waiting for? Take the leap and start your budget!
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