When it comes to managing your money, it is crucial for you to create a budget. It is the responsible thing to do, as it is critical for you to spend and save wisely.
The good news is that budgeting does not have to be complicated. You can create a simple monthly budget in Excel. Or you can go online and find budget tools to download.
If you are on the fence about budgeting, below are some solid reasons why you should make a budget.
1) A budget is a critical tool in helping you keep track of where your money goes.
It’s far too easy to spend money these days, especially if you have a couple of credit cards. How many times have you gone into a drugstore to get an item or two, and walked out having spent close to $100? Yet, if asked a month later what you bought, you would not remember.
A budget is a tool that helps you monitor what you spend. Equally, if not more, important, it helps you plan for your spending.
When you make a budget, you first determine what you make each month. A monthly budget is advisable, as you have bills on a monthly basis. And this unit of time is easily manageable.
After you determine what you make, you list out all of your expenses. Some of them are known numbers, such as your rent or school tuition. Yet, others are estimates, such as your power bill or your grocery spending.
The key is to plan according to what you are making, and what your expenses are. You may need to make some adjustments, as it is likely you may find you are spending more than you should be. You also want to budget in a slot for money to go into a safety nest.
2) Following a budget will help you reach greater financial stability.
Now more than ever, you need to make sure you have savings and a safety net. In a recession, your job is less safe, and the future feels more uncertain than normal.
If you make and stick to a budget, you are better securing your financial stability. Instead of just spending with reckless abandon, you are taking control and planning how to wisely spend and save. A budget is needed to help you make that happen.
3) A budget will help you become more disciplined with spending.
Sometimes it can be very eye opening to see just where your money has been going. For some people, it is truly shocking.
When you make a budget, though, that element of surprise is gone. You will be more likely to be accountable for what you spend. And, a budget can instill greater discipline in spending.
These are some of the main reasons to form a budget. Just think of your personal finances as your own small business. You need to apply the same planning, efforts and organizational skills in managing your budget as you would a work project.
Once you get used to working within a budget, you will wonder how you ever got by without one. Budgets are critical financial tools. Their return on investment is high indeed.