BUDGET YOUR MONEY! We’re sure you’ve heard that over and over again; and we’re sure its not the first, and certainly not going to be last time you’ll ever read this. So have you planned a budget yet? If not, then after reading this article, you’ll know why its really important to always plan a financial budget. Here are six good reasons why everyone should create and stick to a budget.
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#1. You Keep Your Eyes On The Prize
A budget is simply an estimate of income and expenditure for a set period of time. This helps you figure out your long-term goals and work towards achieving them. If you’re used to spending your money on every fancy thing that seem to catch your eye, how will you end up saving for something important?
A budget helps you map out your long-term goals (instead of what you need at the moment), save funds for it, keep track of your steady progress, and make your dreams a reality. In fact, you’ll realize that that bimbo dress you saw doesn’t fit into your budget, and you just have to let go. Having a budget reminds you that you really have some important things to deal with.
#2. You Don’t Spend What You Don’t Have
Most people spend money they don’t even have — thanks to credit cards. A 2019 study from Value Penguin found that the median credit card debt per household was $2,300 as at June 2019. Before credit cards, people knew whether they were living within their means. By the end of the month, they knew if they had enough money to pay for expenses (and even had some to save). Their lives were on track.
Nowadays, people easily overuse and abuse their credit cards until they realize they’re weighing down on debt. However, if you have a budget, you’ll never get yourself financially handicapped. If you know exactly how much you earn, you’ll know how much you can spend each month and how much you could save.
Of course, this means crunching the numbers; there’s no fun in that. Think of it as: when your spending freak friends are getting to meet with debt counselor at the end of the season, you’ll be thinking of where to spend your summer vacation — or better yet still, which house you want to buy.
#3. You Plan A Happy Retirement
Let’s say you plan a budget, and you spend income responsibly until you retire. No credit card debt. Good job! But it seems you’re forgetting something. It is important to spend wisely today, so as it is also to save for the future. A well-planned budget is all you need. So its important to invest as well into your budget.
Set aside a portion of your income towards your Individual Retirement Account (IRA), 401(k) or other retirement funds, and you’ll end up building a secure nest egg. It might be tough getting started, though its worth it. Which future do you want: spending vacations golfing and beaching, or working for few hours just to make ends meet? You decide right now.
#4. You Prepare For Emergencies
Life is full of (good and bad) expectations, and if you don’t plan ahead, it might take you by surprise. This is when you get fired, fall sick or injured, get dumped by your significant other, or suddenly lose a loved one. It could end up creating a financial sandstorm. And it seems these emergencies kick in when you least expect — when you’re strapped out of funds.
This is why you need an emergency fund, and your budget should include one that has at least three to six months worth of living expenses. This would take much time to save that much money, but will ensure that you don’t wind up into debt after a life crisis. But don’t start saving a majority of your income into your emergency fund just yet. Start small, it would eventually grow into a huge asset enough to save your financial future from collapsing.
#5. You Avoid Bad Spending Habits
Of course, having a budget helps you take a closer look at your spending habits; and you realize that it isn’t all that you want that you need. That awkward moment you realize that you really don’t watch all 500 channels on your costly extended cable plan — do you, honestly? It seems you spend a lot of money on a lot of things you don’t need. Budgeting allows you to think it over again about your expenses.
#6. You’re Better Than Counting Sheep
Sticking to a budget will also let you free your mind from counting down till its payday. That stressing moment of the month when your entire worry is how you’re going to pay the bills. Next month? A budget helps you ease the stress. People often lose sleep over their financial issues by letting their money control them. Having a budget lets you never lose sleep over your finances.
Of course, you really need a budget. There are countless advantages of having a budget than on having one. So what are you waiting for? We highly recommend the 50/20/30 rule if you’re new to this. Its time to start budgeting!
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Written by: Nana Kwadwo, Wed, Aug 28, 2019.