The Benefits Of Budgeting

The benefits of budgeting go beyond organizing money and tracking your spending. Budgeting gives you control over your cash, and you can plan for your wants and needs.

A good budget will give you the confidence to make good money management decisions.

If you think living by a budget is complicated. It doesn’t need to be there are ways to simplify your budget.

A Budget Gives You Control Over Your Money

A strong budget is necessary if you will have a better life. A budget allows you to direct money to things important to you. You can find waste, and instead of wasting, you can save what you once wasted, giving you more money for the things that are important to you.

Did you know the average American will spend $180,000 for interest during their lifetime? Paying interest on loans and credit cards is a huge financial drain. Just think of what you could do if you had that much money.

Think of it like this. That $180,000 can be yours if you budget your money, avoid debt, and save for your upcoming needs and wants.

Most people have trouble saving for the little things, so it makes sense they would have a problem saving for the larger items.

The secret to all saving is to use a budget and sinking funds. If you are saving for something big, you need to know this how to save for something big.

Using a budget will give you this kind of control.

Focus On Your Financial Goals

Have you ever wondered what a financial goal is? Financial goals can best describe: Where do you want to be in 5 years, 10 years, or 20 years?

Simply put, financial goals are what you want and the priority you assign to the item.

A possible list of financial goals would be

Have $4,000 in emergency funds 1 year
Have the money saved to buy a new car 5 years
Have the down payment for a house 5 years
Have the money to send the kids through college 18 years

Every item on this list is a financial goal. A financial goal is anything that requires money.

If you budget your money, you can’t help but focus on your goals because you are engaging with your budget. You can find financial leaks (waste). And the leaks can be redirected to your financial goals.

You Know Where Your Money Is Going

No one has an endless supply of money, which makes it essential to know where it’s going. Knowing where your money is going, you can also direct it to the things most important to you.

Think about where your money is going. Is there a place you could save and redirect the difference to a category that’s not fully funded, maybe a new home, car, or vacation?

There are many places you can save money. If you have a car, you have car insurance. Are you getting the best deal? Could you raise your deductible and save a few dollars? You could change companies and get a lower premium. Inspect your spending. Do you need or want it? Can you find it cheaper elsewhere if you don’t need it?

You need to know where your money is going.

Keeps You Engaged With Your Finances

If you keep a budget and track your spending, you will be engaged with your money and budget.

Helps You Start An Emergency Account

We never know what the future holds for us, but the one thing we do know is we will have an emergency, and we need to be prepared for it—knowing where your money is going and saving when possible, and spending less will give you the funds to start an emergency account.

Think of an emergency account as an insurance policy for your long and short-range goals.

Helps When Talking To Family About Money

Open communication for anything is essential. Budgeting is no exception.

If you talk to your family and everyone understands how this will benefit them, it will be easier to have conversations about money.

It will also be easier to enlist their help.

Shows You Where Money Issues Are Or Will Be

You will see red flags when engaged with your budget and spot potential trouble before it happens.

You’ll be tuned into the different categories in your budget, and you will know when they are fully funded and when they aren’t.

If your category for health care deductible is low, you will know you need to add more money to this fund. But you first saw the problem with your budget.

This will be true of all your categories, whether they are sinking funds or regular budget categories.

How Much Can You Borrow

As much as I preach about debt free, sometimes it’s just impossible. There are and will be times it makes more sense to borrow than it does not borrow.

The amount you can borrow is based on your income, payment history, and debt.

The amount you can borrow will be affected by the amount you are in debt.

If you can borrow $50,000 and already owe $40,000 you can only borrow $10,000.