Budgeting is about more than penny-pinching or worrying about money. It’s about having a longer-term, smarter vision of what to do with your dollars and cents – and it can make a surprisingly big difference. Here is a guide to the many advantages of setting a budget.
Stay Organized and on Top of Spending and Saving
Setting a budget helps you stay organized and stay on top of what you’re spending and saving. You want to know exactly what is coming in and what is going out, because without this knowledge you’re just winging it and you’re likely to end up in the red at the end of the month.
When you set a budget you know where you’re at and you can make changes accordingly. You’re also all set for taxes and able to check up on any bills or income without a huge hassle.¹
Develop Healthy Financial Habits
As much as budgeting will help you in your day-to-day and overall finances, it will also build extremely valuable financial habits that will stick with you.
Seeing what you’re spending on and separating out necessities from optional purchases as well as taking stock of your debt and loans will help you learn how to avoid unnecessary expenditures and start treating your money more responsibly.²
Shows You Where You Stand for Borrowing
Another advantage of setting a budget is that it shows you where you stand for borrowing. There are cases where a loan or credit card are absolutely necessary, and having a budget will show you what you can afford to pay in installments and how large of a loan you can take out right now, making the whole process of borrowing less stressful and confusing.³
Boost Your Net Worth
If you’ve been wondering how to boost your net worth then obviously the answer is make more money and spend less. Budgeting can help you do that. As you track your spending, borrowing and earning you will improve your money skills and learn to avoid burdensome debt that you can’t pay off.
This will propel you toward a future with greater net worth and less financial weak points. You will no longer feel like you’re bailing water out of a boat that’s always sinking, instead you’ll feel like you’re at the helm of a majestic battleship called HMS Wealth.⁴
Be Ready for the Unexpected
Having a budget lets you set aside buffer funds for the unexpected, whether that’s a broken heating system, a hole in the roof or a health emergency and work stoppage. Instead of using what you have until there’s a problem, a budget lets you already anticipate that problem. And if it doesn’t happen – fingers crossed – all the better for your personal and financial situation.³
Financial Goals Become in Reach
Having a budget and sticking to it will bring your financial goals into reach, whether that’s having the funds for your children’s university education or being able to afford retirement housing for your parents.
Learning to stick to your monthly budget will help you and your loved ones be able to actually set money aside and have it available for other opportunities and it will alert you to financial “red flags” where improvement is needed or a spending reduction is required.²
Control Your Money, Not the Other Way Around
If you want to control your money then a budget is the perfect way to go about that. You can judge purchases and savings in the context of the bigger picture instead of taking a wild guess in the dark and begin to truly get a grip on where you’re headed financially and how to make sure it’s a smooth ride.¹