A budget is a plan for every dollar you earn. It makes your money work harder and smarter for you. The financial gurus are all emphasizing the importance of budgeting for financial security. Most surveys around the globe suggest that many people are not listening to the experts. Budgeting can be intimidating if you’ve been winging your finances so far with no inkling of a budget in place. But, once you know the ins and outs of it, it’s as simple as it gets. It’s just a spending plan that factors in your income and current and future expenditures and financial goals. It’s actually a pretty empowering financial tool to have in your kit.
Here are five reasons why everyone who earns and/or spends money should have a sensible budget and stick religiously to it.
1. It makes it easier for you to work towards your dreams
Let’s say, you want to buy a new car, go on a luxurious vacation, or put a down payment on a house. But if you throw away money at every glittery thing that you fancy in the stores, how do you expect to save up enough to get your dream house, car or vacation? If you don’t have your goals listed, they amount to wishful thinking, and it’s highly unlikely that you’ll be reaching them anytime soon.
Having a budget helps you keep an eye on the long-term goals and work slowly and steadily towards them with growing motivation. A budget makes you save your money for the big plans and things, lets you keep track of your performance, and keeps you excited as you work towards your dream. With a budget, disciplined spending seems easier and more rewarding.
2. It Keeps You Protected after You Retire
It’s very important to factor in the future scenarios when you budget. Your budget has provisions for your retirement savings. Slowly but surely, month by month, you are ensuring that every penny you save will be worth it at the end when you need it the most. Isn’t it far more tempting to spend your retirement days vacationing and relaxing rather than stressing about the groceries and bills and trying to make ends meet?
3. It Gives you an Umbrella for Rainy Days
Life is filled with good and bad surprises. Budgeting can make it easier to cope with the bad ones, at least financially. Having a safe financial cushion to land on when you lose your job or go through periods of physical sickness or emotional turmoil ensures that you don’t spiral into debt to add to your ongoing woes. This ‘cushion’ or emergency fund cannot be built on short notice. It requires consistent budgeting with bite-size, realistic goals and actions. In the end, it’s the little drops that make up the ocean.
4. It Forces You to Examine Your Spending Habits.
Crafting, following and auditing a budget really puts your spending habits in the spotlight. You are forced to re-examine how wise it is to spend half your salary on hoarding shoes. You start to notice how seemingly harmless and mindless spending habits are draining your wallet and mental peace. You finally get the answer to where all your money is disappearing and how you can stop this disappearing act! Making small lifestyle changes, and learning to choose differently can go a long way in saving money. A budget will make you do just that.
The bottom line is that with a budget, you won’t be fretting over how to pay the bills. You’ll have everything sorted out beforehand. You will finally be controlling your money, rather than letting your money control you.
Now that you realize how indispensable the budget is, let’s do it.