Although I’ve addressed this in the past, I’m going to reiterate the importance of budgeting with a bit more clarity. Life happens, and even though budgeting isn’t exactly the same as financial planning, it’s really just the beginning.
Money management is one of the most important aspects of our lives. When people or companies don’t budget and stick to it, what happens? People lose their homes, jobs, and their overall well-being. Budgeting answers certain questions that we have to deal with but don’t want to:
-Is there enough money to cover all expenses?
-Is there a plan for leftover money?
-Do you KNOW that there will be money left over?
I know most people don’t like having to deal with numbers and calculations. It can be extremely overwhelming for some, but the real deal is this: EVERYONE NEEDS A BUDGET! I honestly believe that most people should be doing their own budgeting. I highly encourage all to either do their own budget or hire someone who can help (for those who may not be capable for whatever reason). Here’s why:
Money comes in and money goes out—but do you know what’s coming and going? When you implement a budget, on ONE piece of paper you can have a better understanding of your total income and total expenses! When this information is documented and kept organized it can be of great value when things like tax season come up.
A budget forces you to track where you’re spending. If it feels like you’re never able to get ahead monetarily, you’re not alone, but the solution is to look at your expenses. The answers are in black and white and you can decide what NEEDS to be spent and where to cut spending. You won’t have a clear idea of what you’re wasting your money on without a budget.
Many of us need to borrow money to get by and the majority of us are not capable of paying that debt off quickly. That leaves us with added liabilities—not being able to pay it can lead to many different kinds of losses but STILL OWING! A budget allows you the ability to see where you can cut your spending in one area and apply that money to another. A budget can get you to a place where you don’t have to use credit cards, loans, etc. to get by.
A budget helps you to create a plan. Do you really want a financial lifestyle that spirals out of control? Where you blow through your savings (if you have any) and skyrocket your debt? I didn’t think so—NO ONE wants that! When you create a budget BEFORE you spend you’ll have a better idea of what you can afford to splurge on. Keeping track of your budget will allow you to SEE what money is left over after all of your expenses have been taken care of.
What are your financial goals? For many these days, the goal is staying out of the negative! With a budget, that can be easily done. After that, when you get to a point where you actually have money left over after paying off all your expenses (net income) you can start planning for an emergency fund, paying off debt, creating a retirement account, that trip to Costa Rica, etc. You can use your budget to cut out some of your expenses to INCREASE your NET INCOME to meet financial goals more quickly.
Plan for Spending
It’s possible to get by without a budget—but it can take a lot longer and cost a lot more if you don’t budget and make a plan for spending. We get sidetracked by all the shiny stuff in life or tend to buy things on impulse. The cool thing about a budget is that it can be changed. It allows us to be able to make adjustments to see where we can splurge and/or put extra funds towards a financial goal we’ve set for ourselves.
It can take a few months for a budget to start working for you—it’ll definitely take you that long to get used to sticking to it. But it IS necessary if you want to come out ahead and on top. I don’t know anyone that WANTS to be stuck in their current financial situation. I’ve only ever met people who want to grow financially, whether it’s to become stable, have savings, or just to figure out a way to splurge more without hurting them in the long run. A budget is one of the easiest and most effective ways to manage money and make it work for you.
If you find yourself getting overwhelmed, please feel free to contact me! Let me know if you got any value from this or have any questions by leaving a comment below!