Financial success without a budget is impossible. Win a Million dollars in lotto and with no budgeting, within five years you will be bankrupt. Learn the reasons why budgeting is so important.
Times are tough enough these days. Not keeping a budget is simply wasting money. Though budgeting can take a little time and effort, it is really minimal and the results can be well worth the effort. Learn the following important reasons to budget.
What a Budget does for you:
Plan for the future: a budget is the perfect tool for planning. Until you are able to keep track of your finances real planning is impossible. Once you have a budget you get the ability to properly allocate even the slimmest of finances to the maximum gain possible.
Understand where money goes:
The reason to budget is for the simple reason of planning and understanding where the money goes. It is hard to see how money is wasted and how some expenses can be cut out or streamlined until you have a good budget in place and have done some tracking of finances and expenditures.
Make saving decisions
Once you have the budget planned out and the data on your expenditures it is time to make those hard decisions. When you see patterns of spending choices can be made of what can be cut out, what can be combined and ways to make savings adjustments within your budget. Any good budget should be able to be trimmed by a good 10-15%.
Results of a Budget:
Pay down Debt or Save Money
The savings from your budget is far from being pointless. That 10-15% extra has a hugely important reason. For anyone behind on debts that money is perfect for paying down those debts. Paying down the largest interest debts first will free up more money which in turn can be used to pay down more debts. Once all the debts are cleared this money can be used for savings.
There is an old saying, “control your finances before your finances control you.” Anyone who has been behind on debt can tell you that it is not a fun process. Credit companies charge higher interest rates and exorbitant late fees for those who have the most trouble paying. By setting a budget, and first making sure that all these bills are paid and then working to pay down the highest percentage interest debts, you are finally controlling your debt, rather than the other way around.
Published in: Personal Finance