MoneyTree

Happy New Year!

Budgeting is one of the most important financial habits you can adopt. But if you’ve never lived on a budget, or haven’t experienced the all the benefits that budgeting has to offer, it’s easy to wonder why it’s such a prominent aspect of personal finance. So, why is budgeting important?

In short, budgeting is important because it helps you control your spending, track your expenses, and save more money. Additionally, budgeting can help you make better financial decisions, prepare for emergencies, get out of debt, and stay focused on your long-term financial goals.

Let’s get started!

1.  Budgeting Helps You Control Your Spending

Let’s be honest, when you operate your finances without a budget, you don’t really have anything holding you back from spending beyond your means. Sure, you might have a general idea about how much money you can spend each month, but without hard, accurate numbers, it’s easy to lose control of your spending habits. In other  words, budgeting is important if you want to keep a close eye on your daily spending habits, understand the impact of seemingly small expenses, and take control of your spending.

2.  Budgeting Keeps You On Track For Your Financial Goals

Along the same lines of controlling your spending, budgeting is important because it keeps you on track when you are trying to achieve your financial goals. Let’s be honest, setting goals is pretty easy. Anybody can do it. You just think of something you want to achieve, and then set a defined timeline to achieve it. But here’s the thing, setting goals and actually achieving your goals are two very different things.

3.  Budgeting Keeps You Organized

Disorganization is another one of those words that doesn’t mix well with personal finance. And the longer you live without a budget, the easier it becomes for your financial life to get messy. Between all your monthly bills, debt payments, and all your other expenses, things can just slip through the cracks.

Before you know it, you are struggling to get by, and stressed about how you are going to make things work. In other words, it’s easier to live on a budget and keep your financial life organized, than it is to try to get your finances in order after you have allowed them to get disorganized.

4.  Budgeting Helps You Prepare For Emergencies

I have news for you, life is full of all sorts of emergency expenses. From hospital bills to unexpected home repairs, if you don’t prepare your finances ahead of the game, you won’t be ready when those expenses come your way. And that can get pretty painful. On the other hand, if you make a point to save for emergency expenses in your monthly budget, then you can avoid all sorts of financial difficulty. In general, we recommend you save at least 3 to 6 months worth of living expenses.

5.  Budgeting Helps You Save Money

In a roundabout way, I have already talked about this, but one of the more obvious benefits of budgeting is that it helps you save money. The best practice in anyone’s financial life is to “save before spend”. And guess what, Budget is the best tool to figure this out. It helps you to save as well as makes you rich!

6.  Budgeting Helps You Stay Ahead

After everything we’ve talked about, this might also seem a little obvious, but budgeting helps you get (and stay) ahead. Beyond that, living on a budget can help you finally build that financial life you always imagined.

Budgeting is one of the most important financial habits you can adopt. Between helping you achieve your financial goals, keeping you from getting financially overwhelmed, and even helping you avoid or get out of debt, there are so many reasons to live on a budget.

So take a new year's Resolution to always live in a Budget and never over spend and over expense unecessary.