It provides peace of mind.Ī budget gives you peace of mind by helping you know exactly how much money you have at any given time. Keep it current, and it can give you the roadmap to future financial health. An out-of-date budget, that does not reflect your current situation, will end up being ignored, and if it is ignored, it will not be useless - an old tool to throw out. As your situation changes, so must your budget. For example, if you’re barely scraping by each month, a budget can help you know where you can afford to trim your expenses, or if you need to look for an additional source of income.Ī budget should be a tool for your use. It gives you a clear picture of your finances.īy monitoring how much money you have coming in and going out each month, you can better assess your finances and make adjustments as necessary. Remember: the primary objective of a budget is to help you spend within your actual income, so you don’t have to rely on credit cards and build up debt. So, rather than using credit to buy that new appliance or things that come up annually like school supplies or insurance fees, you save the money monthly and pay cash when the time comes. Your budget should help you identify those needs that need to be saved for, and give you a plan to meet those needs. The cost is reduced by saving for the purchase because, instead of paying high interest on borrowed money, like a credit card, your money can actually earn interest as you save it to meet future needs. If we save for those kinds of purchases, we avoid accumulating unnecessary debt, and the actual cost of the items ends up being less. We end up putting purchases for which we could have saved, onto credit instead. Oftentimes, we run up debt because of a lack of planning. It keeps you from accumulating too much debt. Your budget will help you to stay on track with all your goals, and to reach these goals faster. The longer-term goals are likely the most important ones for your future well being, but they are also the hardest to stay on track with. It is good to have a few short term, easy to accomplish goals that will help keep you motivated, as well as the more expensive medium and long term goals. The budgeting process can help you identify those goals, and rank them in importance. Most of us have financial goals, such as paying down debt, saving for college (or retirement), saving for a car or a downpayment on a house, or building up an emergency fund. Based on this information, you can make better financial decisions when shopping or planning with your family. For example, a budget can help you identify whether you’re spending too much in one category or not enough in another. It helps you make financial decisions.īy allocating a certain amount of money to each category, you can better make financial decisions. Once you have kept track of where your money is going, you will be able to identify spending that isn’t in line with your financial goals and redirect that spending to help you meet goals that are a priority for you and your family. That’s a downpayment on a home or a really nice vacation. What could you do with an extra $1200 each year? In five years it would be $6000. For example, maybe you stop for coffee every morning on the way to work, without thinking that this habit can easily add up to $100 a month to your expenses. If you’ve never budgeted or tracked your expenses before, you might be surprised at how much money you probably waste each month. Once you have a clear picture of where you are actually spending your money each month, you will be able to assess whether your spending actually reflects your priorities. Following a budget also encourages you to track your spending carefully, so you don’t go overspend. This is often a wake-up call for many people. The first step to creating a budget is to track your expenses. Have you ever gotten to the end of a pay period, checked your bank account, and asked yourself, “Where did all my money go?!” A budget can answer this question. Here are 7 reasons why budgeting your money is a must: 1. Regardless of your reasons, budgeting your money is a critical part of successful financial management. Or perhaps you think you’re getting along fine without one. Maybe you’ve never really thought about budgeting, or maybe you think it’s unnecessary. If you fall into the other 51%, you probably have your own reasons why you don’t budget. According to a worldwide survey conducted by VISA, only 49% of Canadians keep and follow a household budget.
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