A budget is a roadmap to financial security. You wouldn’t even think about starting out on a cross country vacation without loading your GPS or at least taking a look at a road atlas. Your finances are not that different. Just like with a road trip, you need to know where you are starting from, where you want to end up and how you are going to get there. A budget gives you the essentials you need to get from point A to point B, regardless of whether you want to take the scenic route or the fastest path.
Although budgeting is indeed more work, it pays off with many life-enhancing benefits:
1) Provides you 100% control over your money – A budget is a way of being intentional about the way you spend and save your money. It is said that with budgeting, you control your money and not your money controls you. Budgeting saves you the stress of suddenly having to adjust to lack of funds because you did not initially plan how to spend them. It also helps you decide if you want to sacrifice short term spending like buying coffee everyday in exchange for a long term benefit like a cruise vacation or a new HDTV.
2. Keeps you focused on your money goals – You avoid spending unnecessarily on items and services that do not contribute to attaining your financial goals. If you are working with limited resources, budgeting makes it easier to make ends meet.
3. Makes you aware what is going on with your money – With budgeting, you are clear on what money is coming in, how fast it goes out, and where it is going to. Budgeting saves you from wondering every end of the month where your money went. A budget enables you to know what you can afford, take advantage of buying and investing opportunities, and plan how to lower your debt. It also tells you what is important to you based on how you allocate your funds, how your money is working for you, and how far you are towards reaching your financial goals.
4. Helps you organize your spending and savings – By dividing your money into categories of expenditures and savings, a budget makes you aware which category of expenditure takes which portion of your money. That way, it is easy for you to make adjustments. Budget also serves as a reference for organizing your bills, receipts, and financial statements. When all of your financial transactions are organized for tax time or creditor questions, you save time and effort.
5.Will help create a cushion for unexpected expenses – Budgeting allows you to plan to set aside money for emergency costs. When you budget and take a “big picture” view, you will see potential money problems in advance, and be able to make adjustments before the problem appears.
6) Budgeting helps you invest – Investing is a great way to have your money work for you. Contributing to your retirement early and often should be on your radar so you can retire as planned. Some people use the rule of “whatever is left at the end of the month I will put in my retirement”. This is backward thinking. Try changing your mindset to “paying yourself first”. Meaning knowing how much you need to put away for retirement and paying yourself before anything else. Obviously, this takes time to learn how to balance it correctly so all your bills still get paid but this is by far the best way to reach your investment/savings goals.
7. Last, but not the least, it allows you to live life better – Controlling your money will have a huge positive impact on your life. I believe material things only provide you with a temporary small portion of happiness. You get to enjoy them for a little while, but that fades very quickly. I am all about experiences, traveling and creating lifelong memories. Budgeting has enabled me to have 100% control of my money. Allowing me to travel more.
It will be difficult at first, but most behavioral changes are. You’re changing your mindset and attitude toward your money, and that takes time. But the longer you do it, the easier it becomes. It won’t be too long before your budget has become your habit. And with your spending under control, you’ll be well on your way to meeting your long-term financial goals.