Creating A Budget and Sticking to It—6 Benefits

Personal finance gurus frequently advise that you create a spending plan, or budget. Yet in today’s world of mobile apps and online banking, the idea may seem outdated. Is designing a budget still necessary?

Absolutely. In fact, a budget can be one of your most powerful personal finance tools. Here are seven key benefits of having a spending plan and sticking to it.

You Set and Meet Goals

Managing money without creating a budget is like setting out on a road trip without a GPS. You may not know where you are headed or how to get there. A budget can point you in the direction of your goals, and make achieving them much more likely, with fewer expensive side trips.

Remember that goals need more than just desire; they require facts and deadlines. For example, if you want a pool in your backyard, look at prices for inground pools Santa Rosa Beach and get a quote. Once you know how much it will cost, change your budget accordingly and you may be hosting pool parties within a year. Planning ahead is the key to making it happen.

Meeting financial goals may result in increased confidence in other areas of your life. The skills you gain while mastering a budget at home may lead to improved ability to meet inventory, scheduling and payroll goals at work.

Also Read:

Your sense of accomplishment can carry over into personal achievements and a better social life.

You Are Prepared for Emergencies

Unforeseen expenses are unavoidable. They can be disastrous when you do not have an emergency fund. When you are prepared, the occasional surprise bill is merely annoying.

You may have heard that you need three to six months’ living expenses in your emergency fund. That is a good goal, but rest assured that any amount can help. Start small and work up to $500. Add another $500 for every vehicle and pet you own. Keep the money in a separate account and do not touch it except in true emergencies such as car repairs, vet bills or medical expenses. Wanting pizza and beer on Friday night does not count.

You Take Control of Your Spending

Almost everyone has looked at their bank balance just before payday and wondered where all the money went. Once you have a budget, those days are over. When you follow a budget, you know what comes in and you decide ahead of time exactly where it will go.

You Reduce Stress

Managing money can seem overwhelming. Between meeting current household expenses, planning for large purchases and preparing for retirement, it can feel like a juggling act. A budget helps you organize your spending and saving, reducing your stress levels.

In turn, being less anxious can improve personal relationships and add to the overall quality of your life. Reducing stress may even improve your physical health.

You May Improve Your Marriage

Many married couples argue over money. When you and your partner sit down to begin creating your budget, you talk about money, values and personal beliefs. Making decisions together can significantly reduce conflict. You may initially disagree about financial matters. However, disagreeing about an expenditure beforehand leads to a discussion, whereas disagreeing over money that has already been spent can become a battle.

You Build Wealth

Budgeting is often the first step to paying your bills on time, every time. That step alone can save you hundreds each year in late fees and penalties. In addition, after six months of on-time payments, your credit score should improve. Less debt means more freedom.

One of the best outcomes of creating a budgeting is having money to invest. This is important because successful investing is a key to building wealth. Devote a small amount of money each month to investments such as an index fund or low-fee mutual fund. If risk makes you nervous, opt for a safer instrument such as a long-term certificate of deposit.

You may be intimidated, but there are substantial benefits to taking control of your finances. The first step is creating a budget that fits your income and your lifestyle.

Spread the love