Budgeting for Beginners; 9 Reasons Why You Should Be Budgeting
If you’re new to budgeting, it’s important to understand what a budget is and how it helps you examine what you earn and how you are spending that income. A budget is a financial plan that takes income and expenses into account and provides estimates for how much you make and spend over a given period of time.
- Fixed expenses are expenses that stay the same from month to month, such as rent payments.
- Flexible expenses are expenses that change from month to month, such as how much you spend on utilities
- Total expenses are the combined amount of your fixed and flexible expenses.
- Total monthly income is the income from your job or other resources including investment dividends, pensions, Social Security benefits, rental income and more.
- Disposable income is the money you have left over after you subtract your income taxes from your income.
If you find you are not able to stick to your budget, it may mean you are spending beyond your means or that your budget is not flexible enough. Take the time to review and readjust your budget monthly until you find a plan that works for you.
Here are 9 good reasons you should be budgeting your expenses
1. You will find you have more money than you thought
Now that you have a budget and all your money is already spent on paper you will find that it can stretch alot further than you thought. You finally have enough money to pay extra on your credit card bills or put into savings.
2. It can help you get out of debt faster
Having extra money to budget into outgoing you now have more option to pay off debt. It’s up to you and your goals, but if you want to make the sacrifice to take extra leisure money and put it towards debt you will find that those total remaining balances go down alot quicker. This can give an immense sense of relief every time you see them
3. It ensures that you will always have enough money for the things you need
Laying out your incoming and outgoing finances will shed new light on your money situation. Now you will know if you have enough money to make ends meet or, if you don’t, you can rearrange your spending habits.
4. Budgeting puts you in control of your financial situation
A budget helps you figure out your long-term goals and work towards them. If you just drift aimlessly through life, tossing your money at every pretty, shiny object that happens to catch your eye, how will you ever save up enough money to buy a car, take that trip to Aruba or put a down payment on a house?
A budget forces you to map out your goals, save your money, keep track of your progress and make your dreams a reality.
5. You will find you put more into savings than you used to
People who do not have a budget tend to save less money than people who do. This is because when you budget you assign your money to do certain things. This allows you to automatically put money into a savings or investment account each month. As you do this you will begin to build wealth. This will give you true financial freedom in the future.
6. Tracking your incoming and outgoing finances will create a good habit of not overspending
Most people who do not have a budget end up overspending each month. This limits their spending power in the future as more and more of their salaries have to be applied to debt payments. If you are worried about restricting your spending, consider what it would feel like to have the majority of your paycheck be applied to credit card payments. The stress of finding a way to pay for the rising cost of gas and food can be astronomically when most of your paycheck is already planned
7. Helps you reach your goals quicker
With a budget, you can focus your money on the things that are most important to you. This may be getting out of debt, saving up for a home or working on starting your own business. Your budget creates a plan and lets you track it to make sure you are reaching your goals.
8. It leads to a happy retirement
As important as it is to spend your money wisely today, it’s also critical to save for your future.
A budget can help you do just that. It’s important to build investment contributions into your budget. If you set aside a portion of your earnings each month to contribute to your IRA, 401(k) or other retirement funds, you’ll eventually build a nice nest egg. Although you may have to sacrifice a little now, it will be worth it down the road. After all, would you rather spend your retirement golfing and taking trips to the beach or working as a greeter at the local grocery store to make ends meet?
9. Budgeting helps you prepare for emergencies
Life is filled with unexpected surprises, some better than others. When you get laid off, become sick or injured, go through a divorce or have a death in the family, it can lead to some serious financial turmoil. Of course, it seems like these emergencies always arise at the worst possible time – when you’re already strapped for cash. This is exactly why everyone needs an emergency fund.