7 Reasons Why You NEED A Budget
7 Reasons Why You Need to Start Budgeting
Throughout life, you’ll be told and taught to budget. As you advance through life, you will figure out how to prioritize needs and wants, to save money, and how to become financially stable. You probably have come across articles like these, but here are top 7 reasons why having a budget may allow you to live a more organized, less stressful and financially secure life.
1. To Set and Achieve Your Goals in Life
Staying focused to achieve your goals in life is the surest way to become successful. For example, if you would like to start your own business, focus on accumulating your capital to reach that goal, and work hard to make sure every step you take, will bring you forward to achieving it. Losing sight of that goal, may delay your timeline in achieving the capital you wanted to accumulate in that specific period of time.
A good budget plan is like a road map to your destination with the best routes and essential stops, all planned out extensively. By having a big picture, you know where you are going, and what you need to do to keep yourself going in that direction.
Coming back to our personal budget, It would be in terms of income and expenses. How much we spend, and how much we actually need to spend, vs how much pay we take home every month. We should first set aside savings before taking what is left for spending, not the other way around.
2. To Keep Your Debts Low
You most likely would have lower debts if you had a budget and stuck to it. Far too many people misuse their credit cards and other mobile means of paying debt. With a credit card, you always think you have money. When you head out for shopping, you pick as many items as you wish because you don’t feel the pain of seeing your money go.
Try carrying cash to a mall and compare how much you spend, versus when you have a credit card. In this case, physical cash may help you to visualise that you have a certain budget catered for leisure spending, the chances of overspending may drastically decrease. But in this day and age where most payments are going “cashless”, a practical budget can help you keep track of your expenses. At a glance, you could pick out what changes could be made, so that your spare cash (income less expenses) could be of a greater margin.
3. To Make You Rich
One of the best benefits of budgeting is that it can help you build wealth. Saving $200 a month leads to $2,400 at the end of the year. In five years, you will have $12,000 extra cash in your bank. If you combine savings with smart investment, your $200 savings per month could be worth $30,000 or more in one decade. Most people don’t always look at saving from this perspective, but you can easily become rich when you save smartly.
4. A Prosperous Retirement
As happy as it makes you feel when you buy a new watch, it is critical that you save for your retirement days. Your fulfilling job today may not always be there, there is always the uncertainty of retrenchment or moving to another job. A day will come when you will want to retire. Will you have enough funds to take you through your retirement when that day comes? You might have regretted not starting retirement planning with your financial advisor when you were much younger.
5. Stay Prepared for Uncertainties
Uncertainties in life are a given, but we can prepare for these uncertainties by utilizing our budget wisely. With a fixed and small amount (as compared to when these catastrophic events hit us and take a big blow on our bank accounts), we can insure ourselves from uncertainties like premature death, major critical illnesses, forced retirement, loss of income, the list goes on. The great thing is that you can get yourself covered for a relatively higher amount, when you start young. This may create more expenses, but you fix and control your financial exposure with an insurance policy.
6. Peace of Mind
Always save for the rainy days! This saying has been passed down from generation to generation. This is also known as an Emergency Fund. A good amount of emergency fund to have, is about 3 to 9 months of your monthly expenses. An emergency fund is an account used to set aside funds needed in the event of a personal financial dilemma, such as the temporary loss of a job, a debilitating illness or a major expense.
7. To Monitor Spending Habits
You do not have to be debt laden to then start preparing a budget. Everyone should have a budget. Not only does it help you avoid debts, it helps you monitor your expenses. A good budget will help you note all the things you may not need, and cut them out. From making ends meet, why not apply budget planning, and increase that margin? It may help you weed out unnecessary expenses or even relooking at how to better plan your expenses (like getting a mobile phone plan that actually suits your needs as opposed to exceeding talktime and data bundles every month).
“A budget is telling your money where to go, instead of wondering where it went” – Dave Ramsey
Do you have any budgeting tips? Share it with us in the comments below!