Making a budget teaches us an important financial lesson, one that cannot be overemphasized.
1. Benefits of Budgeting
Below are a few reasons why everyone should create a budget and stick to it.
It helps to keep your eyes on the prize
It’s very easy to splurge, especially during the holiday season when we can easily forget about saving money for some large investments such as that trip you always wanted to take. A budget will help you stay disciplined so you can make your dreams come true. It will make getting out of the store empty handed less hard.
It helps you avoid debt
Many people across the globe end up spending more than they earn. This is the magic of credit cards that soon becomes your worst nightmare as debt piles up. A budget won’t let you fall in that trap as it will teach you to track your expenses and make sure you live within your means.
It guides you to a happier retirement
The sooner you start saving up for retirement, the better. A budget will be your friend along the way as you can set aside a portion of your income each month to this purpose and treat it as an expense. You’ll thank yourself one day.
It makes you prepared for the unexpected
Change is the only constant in this lifetime yet it is something that most humans dread. But, if your budget includes an emergency fund to cover a few months of your living expenses, you will be equipped to handle the worst of times. Even if you put $10 a week aside, it will build up. There is something quite reassuring in knowing you have such a safety net in these uncertain times.
It helps to become aware of poor spending habits
By tracking your expenses, you will learn more about yourself. A budget makes it easier to identify where are you overspending such as a subscription you forgot to cancel. This process will enable you to build healthy money management habits.
2. Budgeting Tips
The more details you put the better. The more develop your budget, the more easily you will identify areas to save money. Here are a few basic tips to get you started.
Start with a zero
Before each month begins, make a plan and give every dollar a name. In a zero-based budget, your income minus all your expenses equals zero.
Name each category
Giving and saving are at the top of the list, after making sure that you provided food, shelter and utilities, basic clothing and transportation. Monthly expenses include rent, United Illuminating utilities, food, car note, insurance costs, etc. Once your true necessities are taken care of, you can fill in the rest.
Embrace for cuts
Especially in situations where you need to pay off debt, embrace for budget cuts in your life so you can meet your goals. Such decisions include dining out less or canceling your gym membership.
3. How to Cut Your Monthly Expenses and Other Money-Saving Tips
It takes time to get a handle on this whole budgeting thing. Moreover, figuring out how to cut spending isn’t as easy as it sounds but you can do it and in so many ways.
Cut out your credit cards or at least freeze them and switch to cash, at least only for a while. Surveys have shown that people tend to spend less when they are paying with cash as unlike using cards, they actually see and feel their money being spent. If this seems too drastic for you, you can actually freeze your card in a block of ice and hope to gain a bit of a perspective while you wait for the ice to melt to use your card.
Make saving a game
Use the 24-hour rule before making a purchase to minimize the odds of spending mindlessly. Have no-spend days when you don’t buy anything at all. Rewards yourself when you hit a milestone. Make savings fun.
Use your head
We often forget that our brains are powerful than any computer as even those were created by a brain. So, just add your thinking to the process. For the things you know you have to buy, get coupons. For any purchase, look at the total cost so you are not misled by a discounted price. Go through your subscriptions and make sure you are getting your money’s worth if you want to continue paying them.
Takeaway – Budgeting helps you take control of your finances. It is basically an action plan for your money that gives you freedom. When you budget your money wisely, you will never lose sleep over financial issues. What you will realize throughout the process is that you have much more than you realize.