Before getting into what is budgeting, let’s first answer a question that will make it easier to address budgeting. So, what is a budget? A budget is a laid down plan of how money earned will be spent. Budgeting, therefore, is the process of assigning your income to meet certain needs you might have hence, managing your money.
The importance of budgeting
The main importance of budgeting is to prevent regrets, unfinished projects, or a life that’s headed nowhere as a result of misusing money. Picture budgeting like it’s some sort of a recipe on how you’ll use your money. You know your income, or you’ve just made some money. Now, how are you going to use it. You will also get a chance to save and plan your future.
Benefits of budgeting
The real benefits of budgeting are realized when you stick to your budget faithfully. Once you get used to budgeting your income, it will start coming to you subconsciously. Yes, I’m talking about programming your conscious mind. What someone subjects his conscious mind eventually becomes a habit or pattern. That’s due to what psychologists like to refer that the conscious mind shapes the subconscious mind. Motivational speakers, as well as life coaches, tend to lean on that. The same thing can apply to budgeting. Below are a few benefits of budgeting.
1. Control over your money
Budgeting will help you prioritize on your usual expenditure and what remains you save or yet still spend it within your means. You don’t have to spend a lot of money on one thing and then leave some of your needs unattended. So, budgeting will help you at least buy what you want and can afford. There might be unexpected expenditures that might arise, but some might not be important. If it’s something that has to be done, at least you can figure which expenses you can cut.
2. Plan for the future
Budgeting helps eliminate the notion that until you get a raise or make more, and that’s when you’ll start planning your future. You can find the answers hidden in between your income and expenses. If you’re planning to start a business, go back to school, take a vacation, buy a car, or whatever suits you, budgeting will make it easy for you to figure out how and when to do that.
3. Save money
After assigning your money to take of your needs and cutting back on unwanted expenses, any money remaining can be converted into savings. That way, your savings grow, and you don’t have to forfeit your needs and your guilty pleasures. Every aspect of life is happy since you’ve addressed all areas within your means.
4. A Debt-free life
The four points mentioned above play a significant role in a debt-free life. To enjoy that, you have to know what’s coming in and what’s going out. When you look at your actual expenses and income, you probably have more money left every month. A monthly budget, an annual budget, and a long-term budget can help you take a bigger picture look at your finances. By doing so, the need for borrowing might not arise at all.