6 Benefits of Budgeting
6 Benefits of Budgeting That Can Help You Live a Better Life
Okay, we know you hate to budget because you think it will be too hard to follow. Maybe, but if you create a realistic and workable budget with goals, it really isn’t hard at all. We’ll cover 6 primary benefits of budgeting to show you what the results can be.
If you’re like most Americans, chances are you haven’t created a budget and don’t follow the valuable financial advice it provides. There’s nothing magical about a budget…it’s simply a plan to see where your money goes. It shows you spending that is wasteful and the areas to correct.
1. It helps you to set short- and long-term goals
One of the benefits of budgeting is being able to set goals and help you to work in reaching them. If you just keep on spending your money on those impulse items that catch your eye, you’ll never be able to save for the important things. Plus, you’ll more than likely end up with a heavy load of credit card debt.
Creating a budget will allow you to map out your goals, save money for them, and keep track of your progress. Essentially, it can help you to make your dreams a reality. Taking control of your spending is the first step in reaching these goals.
It will be tough for a while, passing up those shiny objects or maybe expensive clothing that doesn’t fit into your budget. But you’ll soon realize that you need to save up for a new car because the old one you have is costing a lot of money in repairs.
2. One of the benefits of budgeting helps to control spending
In today’s world, too many individuals spend money on worthless things they don’t need because of credit cards. To illustrate this fact, in 2020, the average household debt on credit cards was over $7,000.
Before credit cards came into use, it wasn’t hard to know if you were living within your means. When the end of the month came around, and all bills were paid, and there was money left over to put in savings, you knew you were on track.
Now, it’s just the opposite. People who abuse credit cards don’t always know where they stand financially. Sometimes, it’s when they can’t even make the minimum payment on their credit cards because they’re drowning in debt.
The best way for that not to happen is to create a budget you can live with and follow. You know how much money you earn, so it’s a question of how you decide to spend it. The key is to stop the impulse spending and save for the goals you have set.
Don’t make your budget so strict that you can’t possibly follow it. Maybe set a short-term goal for a nice vacation next year as a reward for yourself. A good budget will provide for current expenses, an emergency fund, and of course retirement.
3. Budgeting will help you enjoy retirement
If you’re able to get on track, spend your money wisely, and stay away from credit cards, that’s great. But don’t forget about the future…saving for retirement is critical. The way our government spends our money, don’t depend entirely on social security to pay for your retirement.
This is another one of the benefits of budgeting, it can provide those funds. If possible, set up pre-tax contributions with your employer. Many offer a 401(k) and often match your contributions up to a certain amount. Also, don’t wait to start saving for retirement.
Starting when you’re young, and with compounding, you can save a substantial amount over the years. If you don’t want to be working until you die, start saving now.
4. Budgeting helps you to get ready for life’s emergencies
If there is one certainty in life, it’s Murphy’s law. If something can go wrong, it most assuredly will. That’s why it’s so important to set up an emergency fund in your budget. Many years ago, the general consensus was to have an emergency fund to cover 3 months of expenses. Today, 6 months or even one year is more realistic.
You won’t be able to save that much very quickly, but if you work at it, and budget for it, the fund will continue to increase. You don’t want to accumulate debt when a life emergency happens. That just compounds the problem.
Start small, but be consistent, and your emergency fund will grow. When an emergency arises, it usually happens at the worst time…when you’re already short on cash, so start saving now.
5. It points out bad spending habits
When you create a budget, a good thing to do is to track your spending in detail. You’ll be surprised to see where the money goes. As an example, look at your cable TV bill. What are you spending for the 500 channels you never watch?
The benefits of budgeting can point out bad spending fast. Do you really need all of those clothes in your closet? Do you need or wear those 20 pairs of black shoes? It allows you to re-focus your spending and financial goals.
6. It may even help you to sleep better
Have you ever been kept awake at night worrying if you were going to be able to pay your bills? Unfortunately, this happens to a lot of people, especially in today’s world. High unemployment, high prices, rising crime rate, and so many other things. We probably can’t do much to alleviate these conditions, but we can do something about our financial issues.
We need to take control of our money and budget it wisely. By doing so, we can provide for our present expenses and future retirement. There are many other benefits of budgeting that can help you take control of your spending, but first, you need to begin.
An accountant and tax preparer by profession, Gust’s true passion lies in his company blog titled “HBS Financial Group, Ltd.”. Through this venue, he not only tries to teach individuals about budgeting, money management, and taxation but he writes the majority of the articles as well.