A budget is the foundation of your finances. However, in order to create a budget that will work for you successfully, you must first know where your money goes. This is probably the single biggest step in personal finance. And most people avoid it like the plague. To be truthful, if you feel like you are already stretched to the limits, taking a look into those deep dark recesses can seem quite scary. On the flip side, if you have a lot of money going out on a monthly basis then this can seem like a lot of work. However, the behavior and discipline that comes with creating a budget is one that will benefit you both now and in the future.
I’m here to tell you that it can also be extremely liberating. It is also a big step in taking a hold on your finances. You will be both delighted and dismayed by what you find.
Here are the top 4 reasons you should start digging in today!
Get a reality check on your spending
The biggest benefit in knowing where your money goes is being able to get a reality check on your spending. Accounting for every purchase allows you to see not only what you are spending, but where. It will also help you determine if it is your spending, or your income, that is holding you back from doing what you really want.
Find ways to cut your expenses
Once you know what you are spending and where it is going, you can begin to find areas that are out of control. This will help you find ways that are easy to cut back. It will also help you start down the path of uncovering ways to cut back on your reoccurring expenses. Knowing what expenses are taking the most of your cash can also help you determine if they are worth the cash you are shelling out. For example, is the cost of cable really worth not having a little to put into your emergency fund at the end of the month? Budgeting is a great way of helping to decide between which expenses are needs and which are wants.
Start saving for emergencies
If you aren’t already doing so, saving for an emergency should be a top priority. Having a “rainy day” account will help you in a case of that unexpected emergency. It will also greatly reduce your overall stress of money management since you have reassurance that you are covered for something unexpected. A budget can help you determine what areas of your expenses you can cut back on to help you contribute towards your emergency fund.
Start investing for the future
Investing in you, and your family’s future, should also be a top priority. Whether this is investing for your own retirement or your child’s college education, you should work to make this a reason to begin budgeting. While it is great to live in the moment, a moment that will eventually pass and you will want to ensure that you and your family have solid future ahead.
Creating a Plan Makes the Future Strong
As you can see, doing the leg work to create the foundation for a budget is vitally important. Not only can it help you find money for today, it can also help you find money for the future! The exercise of creating a budget is also one that the entire family can do together. After all, everyone can benefit from having a little extra left over to save towards a vacation!
Without a plan in place, things are not simply going to fall into place. The most successful people are those that plan for the expected and the unexpected. Creating a budget can help you do both of those things.