02.06.2022
WHY IS PERSONAL BUDGET SO IMPORTANT?
Keeping a personal budget allows you to create a spending plan for your money. Budgeting ensures that you always have enough money for the things you need and that are important to you. Following a budget or spending plan will also protect you from debt, and if you are already in debt, it will help you deal with it.
The purpose of the budget is to help create financial stability. By tracking costs and following a planned plan, the budget makes it easier to pay bills on time, build an emergency fund and save on large expenses such as a car or a home. In general, the budget gives a person a stronger financial basis both in everyday life and in the long run.
7 reasons to start budgeting now
Budgeting helps you set long-term goals and work towards them. If you just wander aimlessly through life, throwing away your money for anything that catches your eye, how will you ever save enough money to buy a car or make a down payment for a new home?
Your budget motivates you to set goals, save money, track your progress, and make your dreams come true. Yes, it is sometimes depressing to realize that something you want, an expensive item, does not fit into your budget. But when you remind yourself that you are saving for your own home, it will be much easier to turn around and leave the store empty-handed.
Life is full of unexpected surprises, both good and bad. When you are laid off, damaged, ill or injured, divorced or faced with death in the family, this can lead to serious financial turmoil. Of course, it seems that these contingencies always occur at the worst possible moment - when you do not have enough money. That is why everyone needs an emergency fund.
Your budget should include an emergency fund, which consists of at least three to six months of living expenses. This extra money will guarantee that you will not sink into the depths of debt after a life crisis. Of course, it will take time to save money for a few monthly expenses. You do not need to immediately transfer most of your salary to the emergency fund. Just build it into your budget, set realistic goals and start small.
Building a budget "forces" you to rethink your spending habits and restructure your financial goals. You will probably notice that you spend money on things you don't need, such as various subscriptions. Indiscriminate spending will inevitably lead to overspending on a monthly basis. And overspending limits your purchasing power in the future and guarantees you a lot of stress from looking for a way to cover all your needs and debts.
Budgeting keeps you organized. You'll be surprised to find that it's easier to live on a budget and keep your finances organized than it is to try to get your finances in order once you've missed them. Disorganization in personal finances can be catastrophic. And the longer you live without a budget, the easier it is for your financial life to go wrong and things to get out of hand.
Creating a family budget teaches the couple to talk about money. If you are married, your budget (separate and shared) plays an extremely important role in meeting the needs of the household and family. It helps you plan your financial future together, rely on each other, work in a team for the common good and make sure you look in the same direction.
Unfortunately, many family problems and reasons for divorce are related to money or rather - to their lack. So, if you want to end the financial battles with your partner and finally reach a single financial position, budgeting is an extremely important first step in the right direction. This will take your relationship to the next level, making you wiser and more aware.
Let's say you spend your money responsibly, follow your budget, and never accumulate credit card debt. That's fine, but don't you forget something? As important as it is to spend your money wisely today, saving is also crucial to your future. A well-planned budget can help you do just that.
It is important to anticipate investment contributions in your budget. By directing part of your monthly income to a pension savings account or other pension funds, you will be able to buy security for the future. Even if you have to sacrifice a little now that you are retiring, you will find that it was worth it. Better a poor horse than no horse at all.
Budgeting can help you avoid debt or get out of debt. The rule is simple: if you want to have money (ie to build wealth), then you must stop spending on things you can not afford. In order to save part of your monthly income, you should not use it to repay a loan to someone (with or without interest) for things you could not afford in the past.
Budgeting plays a crucial role in overcoming and avoiding financial difficulties. Understanding and adhering to the financial limits you can afford to reach helps you avoid overspending on things you don't need, so you can save more and have the funds to cover unexpected expenses without taking out a loan. If you stick to the right plan, budgeting can get you out of bad debt.
When planning a budget, you need to decide how reasonable it is to spend in each of the defined categories. So, if you want to invest a significant part of your money in leisure activities, you should not feel bad about your choice, as long as you still manage to save and satisfy your other needs.
One month you can increase the cost of entertainment, and the next - to reduce them. Budgeting is not about limiting the fun in your life. If you have enough money left, it can even open up more opportunities for your favorite activities. And the best part is that it helps you not worry about the financial security of your future.
