“ A budget is telling your money where to go instead of wondering where it went.”
By now you most likely appreciate that having a budget is an important part of your financial plans. A budget in its simplest form is a tool that you use to instruct your money where to go. It can be in the form of an app, a budget template, a pdf form that you fill, or in a book. Whatever works for you, provided you are consistent and actually follow what you resolve.
Typically, you will record your expenses, as well as your savings, debt repayments, and investments, which should march the income you have. A good budget is forward-looking, in other words, it should help you should anticipate the kind of future you want and help you start preparing for it today.
Everyone needs a budget and a good budget at that. Today we delve into some of the reasons why you should have a good budget.
1. Resources are limited
For most of us, we don’t have all the money we will ever need, right now. We build it over time. And so we have to be frugal about using what we have as we receive it. If you earn or have all the money you will ever need and you can get more as and when you need it then you probably can get by without a decent budget.
However, as long as you have a long list of wants that you have to pack as you look for how to finance them, then you are in good company my friend and you, need a good budget too!
2. it gets you to prioritize what is important to you
Since you decide what goes into your budget then you quite easily determine what you will cut out and what you will want more of. Also, you judge for yourself what is important in every season of your life. Where you need to grow your emergency fund, then most of what you save will be channeled towards this.
If you are in the home-buying phase and you want to purchase your home through a mortgage, then you will have most of your savings going towards the home deposit. A good budget allows you to be flexible and get through your life’s seasons.
3. To help you reach your financial goals
Stephen Covey in the 7 habits of highly effective people talks about, begin with the end in mind. That is how you should approach your financial goals. Once you have a clear vision of how you want your financial future to look like, then you create it through your budget, one month at a time, one shilling at a time.
I will say some of my dreams are intimidating, daunting even. However, when I break them down to shorter-term goals that are included in my monthly budget, they become achievable in my eyes and give me the much-needed jolt to keep at it.
4. To cut down on unnecessary expenditure
A good budget helps you cut out “unnecessary fat” in your expenditure. You know how until you put down stuff, you keep thinking I don’t spend a lot of money eating out or I don’t pay too much for cabs or another favorite one, I really don’t spend that much on airtime and data.
Until you see the amounts in black and white and you realize you were having illusions of grandeur! Budgeting wakes you up from dreamland. Especially if you are very honest with yourself, then you can easily adjust the excesses or cut them out entirely.
5. To help you live a financially fulfilling life
There is nothing as liberating as knowing how you have spent your money. A budget removes this process from your mind, which has this uncanny habit of playing tricks on you.
I was having a conversation with a friend recently and she was lamenting at how a new money wallet app shows how much she has processed through her phone, which is usually a lot of money and yet she wonders how come she doesn’t keep a big chunk of this money in her own bank account. Most of the time she is at a loss trying to recall what she was even spending the money on!
6. It helps you build up your financial muscle for emergencies
One of the basics in savings is you have to build up an emergency fund usually, 6 to 9 months’ worth of expenses. What this does is it gives you the confidence to make financial decisions that would be hard to make under an emergency.
7. To help you in investing goals
Lewis Carroll said, “If you don’t know where you are going any road will get you there” but I believe the converse is true, that if you commit to the right road then you will reach your destination. Investing is a long game. You start today and work at it depending on what you want to achieve and over the period you plan to.
The key to the process is to start and keep at it. A budget helps you in fulfilling this, by helping you allocate resources towards each of your investment goals.
8. It cultivates financial discipline
We are creatures of habit and so we thrive in environments where we have well-formed routines. When you get used to budgeting, then you get into the rhythm of checking your expenditure and sticking to what is planned. It is very difficult to be financially disciplined without having a proper plan that you follow.
9. To plan your retirement
I am very passionate about the subject of retirement planning because when I look at the statics that is given annually, without a proper plan it is possible to work all your life and retire to a life of poverty.
I have said this but let me repeat that when it comes to retirement hope is not a strategy and neither are your kids your retirement plan. We have got to work out a plan that takes care of us when we retire. A good budget will help you save up and invest in a good pension fund as well as you acquire other income-generating assets.
10. It Will ultimately help you create wealth that your children can inherit
Leaving a legacy for your children and your children’s children, for me is the ultimate. Wouldn’t it be grand to outlive your wealth and let it serve your offspring? A simple budget, coupled with discipline and consistency will help you achieve this.
A budget is an important ingredient in financial planning and growth, a good budget works as a catalyst in achieving financial freedom. Do not wait, strike while the iron is hot! Draw up your budget then come in the comments section and let’s have a conversation.
Article Source: https://pesasense.com/why-you-need-a-good-budget/