There are countless reasons to budget, yet the majority of the people don’t have one.
Budgets are extremely important and everyone should have a budget. Poor, middle-class, rich, it doesn’t matter. Having a budget will dramatically improve your financial situation.
The association many have with a budget is restrictions and money problems. That cannot be further from the truth. Budgeting can save you money, maximize your pleasure, and spend money on things you value. It will help you reach your goals!
If you’re still not convinced, let’s dive into the reasons why you need to budget!
5 Reasons You Need To Budget
1. A Budget Stops Overspending
Many people that don’t have a budget, will end up overspending each month. It’s so easy nowadays to just swipe your credit card at everything, get a loan for your car, finance your furniture, and more.
Most of the people start a budget out of necessity. They spend more than they earn and they can’t hold that lifestyle any longer.
Here is your wake up call: if you’re spending more than you’re earning, you have to know where your money is going.
When you create a budget, you will see what your biggest spending category is. Only when you create a budget, you will know in what area you are overspending. When you know what the problem is, you can do something about it.
Within a few seconds, you can see where changes need to be made. You will see your income and your expenses categorized, which will enable you to see exactly what categories that need improvement!
[Related Read: 5 Simple Steps To Check Your Financial Health]
2. You Pay Down Debt
Having debt at some point in your life is inevitable. Holding on to it, on the other hand, is a choice.
If you have debt and you can’t seem to get out of it, getting a budget is a great first step. It can help you pay off your debt quicker, which frees up the interest charges.
Imagine the stress that falls off your shoulders when your debt is paid off, that’s an amazing feeling right?
Create a budget and start experiencing that feeling sooner rather than later!
3. You Reach Your Financial Goals
If you’re having ambitious financial goals, having a budget helps you stay on track.
Without a budget, you don’t think about the consequences of spending money on your overall financial goals. When you have a goal for your money you’ll think twice before you spend it. It creates a focus on the thing that is most important to you.
There are different financial goals you can aspire, they may include:
- Vacation – You can save money for a vacation with your budget
- Debt payoff – It can be hard to pay off debt, but with a budget, you might find extra money to put towards your debt.
- Retirement – A budget can help you reach financial independence or (early) retirement sooner, by managing your money better
- Emergency fund – In order to stop living paycheck to paycheck, an emergency fund can give you a lot of freedom. This can protect you against future debt.
Side Note: I recommend you check out You Need A Budget (YNAB). YNAB allows you to see your financial situation in one overview. If you’re from the US or Canada you can also connect your bank accounts, so that you only have to hit refresh and everything is filled out for you. Start your 30-day free trial today!
[Related Read: Financial Goal Setting – 6 Steps To Making 2019 Great]
4. Know What You’re Spending Your Money On
Many people don’t know what they’re spending their money on. They are wasting money and don’t know on what.
With a budget, you can see exactly where your money is going and what expenses you should bring a little extra attention to. The expenses you need to eliminate will become extremely clear. Budgeting makes you rethink your spending habits and let you focus on your financial goals.
It might even lead to you freeing up a few hundred dollar every month when you create a budget. I assume that will help you a lot!
[Related Read: How I Live On Half My Income – And You Can Too!]
5. A Budget Helps You Prepare For Emergencies
We all know that life can throw unexpected curve balls your way. There are many situations in which you might need some extra cash. When your budget is tight, you might not always have the room for a financial setback. I mean, the emergencies always seem to arise with the worst possible timing.
One way to build in a buffer for emergencies is to build your emergency fund.
Your emergency fund should include three to six months of living expenses. This will help you not take on extra debt when a financial emergency occurs. You might become sick, need to take care of someone in your family, or get laid off. That is the moment that you would thank yourself for building up an emergency fund.
Take starting your emergency fund into account when making your budget. It doesn’t matter how much you save every month towards your emergency fund – $50 could be enough for you. When you are slowly building up your emergency fund, it is good to go slow and steady.
[Related Read: How To Start And Build An Emergency Fund – A Quick Guide]
Eventually you will get there!
Do you have a budget or track your spending?