Many people do not bother to make a budget for various reasons. Some people make enough money that they always have money in their account for bills, so they don’t believe they need to make a budget. Others don’t out of pure laziness. Some however, don’t build a budget because they don’t know how. Either way, everyone should have a budget made for these 5 reasons:
1. Budgeting stops you from overspending
Many people don’t really know when they should stop spending. As long as they see there is still money in their account, they are ready to spend it. Building a budget will allow you to set an amount you will spend for certain things. This will reduce your risk of building debt by knowing exactly how much you have to spend each month so that you do not need to use your credit card for any purchases due to you running out of funds.
2. Budgeting helps you save more
One of the concepts of budgeting is to count your saving as a monthly expense, so that you ALWAYS pay yourself first in the form of saving or investing. This is extremely important, as it is very important to consistently fund your investing and to continuously build your wealth. Without a budget, you would not have any guidelines on what you could spend, which may mean that you are spending funds that could have potentially been invested to earn you more money.
3. You Have more control over where you spend
Not only does budgeting help you not overspend, but it allows you to allocate funds to another expense or savings account if you see fit. If you have a vacation coming up, you can easily see by looking at your budget where you can take funds from so that you can put that towards saving for a vacation without interfering with your investing.
4. It can help you reach your goals faster
Having and sticking with your budget allows to you to be able to speed up savings or ramp up your investments. First, making a budget gives you the ability to assign each dollar to a specific cause, so you are utilizing every dollar you make. Because of this, you won’t be wasting a dime so you will have move to allocate for savings and investments. You also gain the ability to see where you are spending, and decide whether you want to move funds from one expense to another. If you are paying off debt and you decide that you want to pay it off faster, you can look at your budget and see what other expenses you can move funds from in order to do so. You may decide you can take a few hundred out of your spending money and move it in to your payment expenses in order to achieve that goal, and easily doable with a budget.
5. Piece of mind
Not having to worry about how you are going to pay your bills or whether you will have enough money to save this month is one of the most important reasons to have a budget. Without piece of mind, it is difficult to make wise financial decisions. Having these worries out of the way will allow you to invest more of your income and be able to concentrate on building your wealth. If you already have your plan for how you will use your income each month planned out, you will never have to worry about having enough to pay the bills, since you automatically allocate funds towards those expenses.