What are the Advantages of Using a Budgeting?
If you are new to personal finance, as you read more you will hear the term budget thrown around quite a bit. In fact, one of the most important foundations to achieving financial success is to create a budget that works for you and stick to it.
Budgeting is a way of planning how to spend money. It can help you make wiser decisions about your spending. Therefore, it is important to choose a budgeting method that will give you an advantage in terms of handling your money. Learning the importance of budgeting your money is key to building a budget you will stick with and follow long-term.
Budgeting your money is a vital step in becoming financially stable. It’s the only way to make sure that you are spending your money wisely and not on impulse purchases.
I haven’t always been the best at sticking to a budget, but after a few years of practice, I’ve been able to master my budget which has helped my family and I pay off all of our debt and live a nice lifestyle.
What is a Budget?
A budget is a system used to keep track of spending and includes paying bills, saving, and money for living expenses. It is important to set up your budget and personalize it according to your spending. Make sure to add all of your spending categories including entertainment because you don’t want to forget about the fun stuff in life.
Essentially, a budget is an input versus output system that tracks your incoming money and spending.
What Kinds of Budgets are Available for Different Financial Sorts?
Budgets are based on the type of financial sort. There are three different types of budgets, which are personal, business, and investment.
Personal budgets are for individuals who want to save money for themselves. Business budgets are for companies that want to spend money on their company, such as buying new equipment or hiring new employees. Investment budgets are for people who have a lot of money and want to invest in something with the hopes of making more money down the line.
If you continue to use a personal budget, you can set yourself up to have an investment budget too.
How to Set Up a Budget that’s Right For You
Do you currently have a personal finance plan? If not, use these steps to create a monthly budget, which can then be broken down into a weekly budget.
A budget is a plan for managing your money. It can be a simple list of what you spend and what you earn, or it can be a complex spreadsheet with more detailed categories and columns.
In order to set up a budget that’s right for you, use these three simple budget steps:
- figure out where all your money goes.
- decide how much money you need for each category of spending
- create a budget that matches your income and spending needs
- stick with your budget
These budget hacks may seem easier said than done, so let’s take a look at how to actually be successful at budgeting.
Grab your budget freebies here:
9 Advantages of Budgeting are:
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1. Save Money
One of the biggest advantages of budgeting is the fact that you will have more money. If you are able to see where you are spending, you can eliminate unneeded spending and put that money back in your bank account.
2. Reduce Stress
Did you know one of the biggest causes of stress in life is money? Often people wonder where they will get the money to pay bills or if they will be charged a huge late fee if they forgot to pay something. Therefore, it is essential to organize your money by using a budget. Your budget will help you see exactly where your money is going and you get to be the boss and tell your money where to go.
3. Be in the Know About Your Money
Since you have taken the time to track spending and write out a budget, you can visually see where your money is going. This can be an eye-opener if you were spending freely before your budget and had no idea you spent $200 on lattes last month. Once you know how much you have and where it is going, you can make better money decisions.
4. Determine Your Wants and Need Easily
If you realized you spend $200 on lattes last month, you can take a good look at if this is truly an essential need in your life. If you really absolutely LOVE coffee, can you cut back on a different area of your budget? Your budget should not deprive you of what is most important, yet, it can help you realize how many hours of your time is spent paying for something that may not mean that much to you.
Feel free to check out this post I wrote entitled: How to Budget and Stil Have What You Want – to help you find your needs and wants and put them in the budget.
5. Control Over Your Future
Once you take reign of your finances you have more control over your financial future and your future in general. You will be able to set some clear, defined money goals and start taking steps to achieve your financial goals. For example, if you have a goal to buy a house, create a sinking fund and add an amount in your budget to save for a down payment.
6. Less Guilt on “Wants”
If you have a budget completed, you can add in categories for things you really want, as long as you have enough money to cover these wants after paying bills and putting aside money in savings. If before you bought items on impulse and felt guilty after, you don’t have to go through this with your new budget. You can clearly see you have the money to buy the items you want.
7. Plan Ahead
If you know you have something coming up, make sure to add it to your budget. For example, I know I spend around $1200 at Christmas time every year. Therefore, I will put around $100 per month aside for Christmas so I don’t go into debt every year.
8. Get rid of things that are unnecessary
Once you have taken a good look at spending, you can begin to cut things you no longer need. For example, do you have a gym membership you never use? This is something you can cut. Another idea is subscriptions you don’t use. I have a free trial of Apple t.v. and I haven’t used it once. I have the date marked down so I don’t forget to cancel and get charged for it. It all depends on if is something you use or need. If you haven’t used it in months, it is best to let it go.
9. Security Over Finances
It feels good to be financially sound and secure. If you have financial discipline, you will feel good about money choices, eliminate stress, and feel secure in your financial future knowing you have a plan and you are not doing your finances on the fly.
What Next…
If you are ready to save more, sign up for the 6-day money savings challenge here and get a free budget template in your class!!
Related Budgeting Posts:
Over 100 Budget Categories for your Personal Budget
7 Things that are Killing Your Budget
How to Overcome Budgeting Challenges
Conclusion: Top Advantages of Budgeting
Using a budget is extremely important for financial success. In order to create a budget take a look at incoming money and spending. Set up a budget for your needs so you can eliminate money stress, cover expenses, and feel financially secure. Don’t let the word budget scare you! Take control of your money.
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