If you have 1 dollar to your name, you should begin a budget. You may ask yourself why budgeting is important. One word can address this question perfectly: Control. You MUST control your money. Even as little as $1.00 needs your attention and control. Yes, budgeting required additional work. Budgeting can also curtail your freedom in enjoying yourself with abandon. Nevertheless, budgeting is your friend. It will show you how to spend your money, how to save your money and how to grow your money. It will prevent overspending and bad debt. Budgeting does not prevent you from enjoying the things in life that cost money, it ensures that you can enjoy the things you want when you want it. Budgeting does require more work, but it pays off in dividends.
Benefits of Budgeting
Being intentional about how you spend your money is a sign of wise financial stewardship. With budgeting, you control your money instead of your money controlling you. Budgeting will prevent some stressors in your life. You can’t put a price tag on that. By budgeting your money, you will find that there are fewer instances of having to adjust your funds because of an expense you did not intend to occur. It will also help you to get the things you want without depriving yourself of the things you need. It can also help you to decide how to make adjustments to your spending. Instead of getting a cup of Starbucks coffee every morning at a price of $5.00 a weekday, which ends up being $100 a month, you can buy a large can of coffee for $10 a month (brew at home) and use the $90 you saved to buy those cute shoes or video game you have been eyeing.
2. Setting goals
Financial goal setting is easier when you have a budget. You avoid spending money on things that will deter the reaching of that goal. Also, budgeting makes it easier to make ends meet each month.
3. Keeping Track of your money
Budgeting helps you to see clearly what money is coming in, how fast it is going out, and where it is going. The end of the month is when we most question where we spent our money if we don’t keep track. Budgeting prevents these types of mysteries in your life. A budget will tell you what you can afford, whether you can take advantage of buying something new, investing in a new venture, or how to lower your debt. It can also shed light on what’s important based on how you spend your money. Budgeting puts you in a position where your money is working for you instead of against you and your goals.
4. Organizing your money
You need to categorize your money. A budget can help you identify expenditures and savings. It’s easier for you to make adjustments when you are financially organized. When your financial transactions are organized it saves you time.
5. Let your money work for you
Budgeting helps you decide in advance how your money will work for you. Investing in things that will help you accrue more money not only provides you with some security, it also helps you to gain more money without putting in more hours at your job or in your career.
6. Saving for expected and unexpected costs
Budgeting allows you to make a savings plan. You should be putting money aside for expected costs as well as unexpected costs. You don’t want to be caught in a financial situation that can deter your goals. Planning for the unexpected is part of good financial stewardship. There is no such thing as extra money. Extra money is money that has yet to be allocated.
7. Building good relationships
If your money is attached to another person, budgeting will help you to communicate with your partner. Your partner could be a parent that helps to finance your life, a spouse, or a future investor. Financial teamwork prevents conflict on how money is used. Creating a budget with your partner will help you to avoid or resolve personal differences and increase trust in the relationship. Budgeting is your teacher on spending responsibility and accountability.
8. Provides early warning to potential financial problems
Don’t close your eyes to the “BIG PICTURE” view of your finances. The big picture will help you to see potential problems on the horizon. Budgeting will help you to make adjustments before the problem occurs.
9. Taking on good debts instead of bad debts
Debt is not necessarily a bad thing. Sometimes we have to take on debts, but how you assume debt will determine if it is a good plan or a mistake. Budgeting shows you how much debt you can realistically take on without causing too much stress on your finances or on your sanity. Debt is the fabric of the American Capitalist Regime. Control is the key to succeeding.
10. Producing additional money
People who budget do not throw their money away. Budgeting eliminates unnecessary spending on things like late fees, penalties, and interest percentages. Thes small expenditures add up over time. It is up to you if it will be negative or positive.
Budgeting does have some drawbacks. If it is going to work, you have to make real significant changes in your spending life. Budgeting does not save you from bad spending habits. Budgeting helps you with your goals and your focus. You must stick with it!
In our next post, I want to provide you with some practical tips on how to create a budget and how to live on a budget. This is an individual exercise. Everyone’s budget will not the same, because everyone’s financial outlook isn’t the same. Till next time!