People dread the “B” word (for budget) taking it as some kind of tedious homework to be dealt with and for the control factor it is commonly associated. For many, a budget is synonymous to a diet. It is very restrictive and prevents you from having fun.
In its most elementary sense, a budget is just a tool for tracking income and expenses. Money in, money out – as simple as that.
What is amazing is that such a very basic spending plan, as others call it, brings a host of advantages that people may just fail to recognize now.
Spending without a budget is like aiming blindly. A budget is your financial guide. Like a roadmap, it gives you direction from where you are now to where you want to be.
It allows you to plan for the future which could be in the form of a purchase of a new house or car or that well-deserved vacation.
It gives you financial flexibility. Using a budget, you know how much money is coming in and how much should be going out to cover expenses. By knowing the difference, you can prioritize spending for the more important things and adjust your lifestyle accordingly to minimize wasteful spending.
Budgeting teaches you discipline and ensures that you live within your means. It’s always fun to spend money at the time of the purchase but it’s not nearly as fun when the bills start to arrive. Setting a budget and adhering to it strictly can help you avoid using credit cards and paying for credit card debts.
It allows you to achieve freedom from debt. Having a budget in place will help you to overcome debt more quickly as you prioritize setting aside a fraction of your income for debt payment. Once you’re out of debt, you can use that extra money for savings.
It gives you financial security. Building an emergency fund and/or retirement fund from a portion of your salary will help you prepare for financial emergencies such as hospitalization or sudden job loss. You see, budgeting’s got you covered.
If you’re constantly concerned on whether you’ll have money to pay for the rent and other bills, budgeting relieves you from that stress knowing that you have already planned or allocated money for these things. It gives you peace of mind knowing that you don’t have to worry about debt and that you have savings in place for emergencies.
It helps you to develop strong money management skills. Using a budget will teach you the value of money and help you understand its power in your life granting you know how to use it wisely. Remember, it is not how much money you make but how much you save that is important. Even low-income earners can outdo professionals if they know and practice sound money management.
It is not the least bit restrictive or penalizing as most people think. It can in fact be liberating and freeing knowing that you are in control of your money and not the other way around. Make your money work for you and use it for your self-gain, for your family and for your enjoyment.
Budgeting is the basic building block of financial success and one of the most important skills to learn in life. When you can manage money successfully and allocate a portion each month to savings and investments, your dream of prosperity is no longer a far-fetched reality.