Just what are the purposes of a budget?
If you’ve never made a spending plan for your finances, you might be wondering what is the purpose of a budget? Or, why is budgeting important?
In this post, I’ll explain to you the many benefits of budgeting, and why its importance in your financial plan cannot be overstated.
First, let me start off by explaining what is the purpose of a budget:
The purpose of a budget is to track your income and expenses so you can plan, manage, and improve your personal finances. A budget is a specific plan for your money that gives you financial boundaries so you can live within your means, control your spending, and manage your money well. Budgeting is important for paying off debt, building savings, and achieving your financial goals.
Pretty simple, right? There are so many benefits to budgeting!
Unfortunately, many people fail to create a budget for their money. This leads to overspending, excessive debt, and a paycheck to paycheck cycle.
If you struggle with these problems in your finances, it’s time to start budgeting! Budgeting is the key to smart money management. You can take control of your finances by following a budget, and start telling your money exactly what to do.
Here are just a few financial benefits you can experience when you follow a budget:
- you have enough saved for emergencies and other unexpected expenses
- you can pay off debt and achieve financial freedom
- you minimize wasteful spending and maximize your income
- you can retire on time and enjoy your golden years in financial peace
- you have more confidence in your financial forecast
There are many more advantages to keeping a budget, which I’ll explain in this post. I believe that once you gain a clear understanding of how useful a budget can be in your life, you can then use it to its fullest potential with your financial planning.
So, if you’re still wondering what is the purpose of a budget, keep reading to learn more about how a budget can help you.
What exactly is a budget?
The first way to think of a budget is like a spending plan for your money. You are deciding, in advance, how you will use your income for a set time period.
You could create a weekly, monthly, or even an annual budget. The budget period you set is up to you. You could even have different budget types for a limited period of time in order to save up for something specific.
As you go through the budget process, you assign every dollar a job. These “jobs” can include household expenses, food costs, discretionary spending amounts, charitable giving, and savings. You can even have a category for “spontaneous spending”.
In budgeting, these are called “categories”. And, as the manager of your money, you get to decide how many dollars are allotted to each category.
Secondly, you can also think of a budget like guard rails for your spending. It will keep you within safe spending boundaries so you don’t fall off the financial cliff.
This provides peace of mind and assurance in how you’re using your money. You don’t need to wonder if you’ll have enough because you’re following a plan that ensures you will.
Thirdly, a budget is like a tool that helps you stay organized and focused. With your budgeting tool, you can move the right levers to make adjustments that help you get closer to your goals faster.
However, a tool is only as helpful as the one using it. You can use your budget to maximize your wealth, or just get by every month. You must learn how to use it to its greatest capacity so you receive the greatest benefit.
Now that you know what a budget is, let’s go over the benefits of budgeting and why it’s so important for your financial health.
17 reasons why budgeting is so important
What is the purpose of budgeting? Actually, there are many purposes. And, they all help you improve your financial health.
From getting your bills paid on time, to saving for a summer vacation, to paying off those pesky credit card bills – budgeting is important for improving your financial situation and creating financial security.
Here are 17 reasons why budgeting is important, and how a spending plan can change your whole financial future.
#1 A budget puts you in control of your finances
Following a budget can give you the control you need so you end up where you want to be. You become the money boss and tell your dollars what to do, so they support your dreams and not crush them.
Most people let life happen to them, instead of making life happen for them. Without a plan, you’re always reacting to circumstances and hoping for the best.
When you take this approach with your money, I can assure you that the best will not happen. Having such a passive attitude will likely lead to excessive debt and insufficient savings.
Taking control of your finances means being intentional. Define what your priorities are, then commit to upholding them in every spending decision you make. Take corrective action when you don’t get the results you want.
Here are 3 steps you can take to maintain financial control with a budget:
- review and update your rolling budget on a regular basis and make adjustments when necessary
- automate your finances with direct deposit, automatic transfers, and automatic bill pay
- get a budgeting app on your mobile device that can be shared with your partner
#2 A budget is a record of your cash flows
Having a budget allows you to record how much money you’re bringing in, how much is being spent, and where it’s all going. This will keep you organized and focused on the financial goals you’ve set for yourself.
Don’t rely on your memory to keep track of your income and expenses. This will only result in overspending, lack of focus, and disorganized finances!
Here are three things you can do to keep a record of your finances with a budget:
- create a spreadsheet on your computer listing all income sources and spending categories
- create your own printable budget template that you can update daily
- download a budgeting app to your phone that will track your cash flows
#3 A budget helps you increase your savings
A budget can help you save money simply because you’re making that decision ahead of time. When you include a “savings” category in your budget, you treat it like any other bill. This ensures that you prioritize savings and pay yourself first.
Adding an emergency savings category will help you save up enough cash to cover 3 to 6 months of living expenses. Your emergency fund will keep you from going into more debt when unexpected expenses arise.
Also, your budget will inform you of how large your emergency fund needs to be. In a financial crisis situation, your main priority is covering necessary expenses like housing and food. By reviewing your spending plan, you can quickly calculate a “bare-bones” budget for times when finances are lacking.
You can also use your budget to save for large purchases in the future. Maybe you want to buy a newer car within the next year, or take your family on a nice vacation.
A budget will help you stay focused on saving for these big expenses, so you can pay cash when the time arises.
Here are 3 things you can do to save money with a budget:
- include a savings category in your budget, and “fund” this category at the beginning of every budget cycle
- automate your savings with direct deposit or automatic transfers
- make realistic saving goals that you can stick with – even $20 a week will add up to more than $1000 a year
#4 A budget helps you forecast and plan your financial progress
After you’ve been following a budget for a few months, you’ll have a good idea of how much you spend in each category. Your budget becomes more predictable as you get used to following a spending plan for your money.
This consistency will help you plan and estimate your savings over the long term.
Forecasting your budget months or years into the future will help you stay on track with long-term financial goals. You’ll also get a high-level view of which months will be a little tighter, and when you can apply more to savings. This will allow you to plan better, be prepared, and not get thrown off track.
Here is how to use budget forecasting and planning for financial progress:
- create a monthly forecasted budget (based on your current spending) for at least 6 months into the future
- make realistic adjustments to your forecasted budget to see how they improve your finances over the long term
- implement the adjustments that return the greatest benefit
#5 A budget can get you out of debt faster
Once you start tracking your spending with a budget, you may come face to face with how much of your income is eaten up by debt.
This is an unpleasant, but necessary, realization to start developing better money habits and reassess your financial priorities. Don’t lose hope!
A budget can help you implement a debt payoff plan so you can see real progress with paying down those accounts. By making debt payoff a priority in your budget, you’ll be intentional about finding ways to reduce spending and applying more money towards your debts. This way, you’ll get them paid off faster and greatly improve your financial life.
A budget will also help you stay out of debt. Your spending plan is the key to knowing how you can live within the boundaries of your income. You’ll always know what you can afford now and what you need to save for.
How to use your budget to get out of debt:
- add up all of your debt balances so you know what your total payoff is
- cut discretionary spending categories in your budget, and apply those funds to your debt
- forecast your monthly financial budgets for 6 or 12 months to gauge how long it will take before you’re debt-free
#6 A budget can maximize your income and increase net worth
I imagine you want to get the most out of every dollar you work for, right? A budget will help you maximize your income so you stop wasting money and start increasing growth.
Too many people choose to throw away money on purchases that have very little value, are quickly used up, and don’t provide long-term benefit. A budget brings into focus those financial decisions that have the greatest capacity to increase your net worth.
The money you can save with a budget can be allocated toward investment opportunities that will make your money grow with compound interest. When you maximize your income in this way, your net worth increases and your credit score improves.
No longer are you working for money to spend. Instead, you align your financial decisions with your values and build wealth as your money works for you.
Here’s how you can use your budget to maximize income:
- prioritize your expense categories and identify bad spending habits that can be improved
- create a budget that reflects and supports your priorities and financial goals
- redirect funds from non-critical categories toward financial vehicles that provide growth
#7 A budget will reveal wasteful spending
When you don’t have a budget, there’s a good chance you only have some rough budget estimations of your expenses during the month. It’s only when you’re intentional about tracking your finances do you realize how much money you’re possibly wasting.
The budgeting process will help you find all the wasteful leaks in your spending. You won’t need to wonder where all your money is going anymore. You can identify where you’re wasting money, and take steps to decrease or eliminate certain budget expenses.
Once you become aware of how much you waste on daily spending, you’ll be more intentional about what you spend your money on. You may decide you don’t need to go through the Starbucks drive-through every morning or pay for those 500 channels on cable that you never watch anyway.
Here are 4 tactics you can use with your budget to stop wasteful spending:
- track every expense you make for one month
- add up how much money you spent on unnecessary items like subscriptions, eating out, clothing, etc.
- assign budget constraints in these areas and apply more toward debt and savings
- also review essentials like utilities, insurance premiums, and cell phone plans to see if you can lower these expenses as well
#8 A budget helps reduce financial stress
Being stressed about money can lead to multiple health issues, including poor sleeping habits, depression, and weight gain. Chronic stress can be even more serious, resulting in heart disease and even cancer.
There is no question that quality health speaks directly to your quality of life. It’s critical to your physical and mental well-being to minimize financial stress when possible.
When you follow a budget, you have more confidence in your financial future. You won’t be worried about how to cover your mortgage payment, paying off your credit cards, having enough to feed your family, or being prepared for retirement.
Following a budget can minimize financial uncertainty and alleviate stress. This is because you are in control of your money.
The purposes of a budget is centered around making your financial future more predictable. And, when you know what the rest of the month looks like in terms of money matters, your mind can focus on more productive thoughts.
Take these three steps to help reduce stress with your budget:
- make sure your budget is based on realistic circumstances and expectations
- review your budget often (daily or weekly) so you always know the condition of your finances
- forecast your budget at least 3 months ahead, so you feel confident about your short-term objectives
#9 A budget can inform your long-term goals
When you take control of your finances and manage your money with purpose, you gain valuable insight into your financial future. That’s because a budget will shape the long-term goals you set, and guide you toward achieving them.
You no longer spend aimlessly without direction. Instead, you approach your future with confidence and certainty, because you know exactly where you’re going.
This assurance will inspire you to envision the possibilities for your life 5, 10, even 20 years from now. Your mind will open up to opportunities you never considered before.
All because you’ve taken back control, and now you see you’re totally capable of making your dreams a reality.
Maybe your dream is to buy a new house, or take your whole family on an extended vacation, or retire 5 years early.
Using a budget to manage your money will give you the insight you need to achieve these long-term goals. Of course, your budget won’t give you the power to predict the future. But it can prepare you for whatever it brings.
How to use your budget to create a strategy for long-term goals:
- identify a financial goal you want to achieve within the next 3-5 years
- analyze your past spending plans and forecast your budget to get a realistic idea of how much you can save every month; align your goal date with these projections
- remember to include any anticipated extra income you’ll occasionally receive such as annual bonuses, tax refunds, or the sale of a large asset
#10 A budget makes your personal finances a priority
Why do so many people have a hard time controlling their money?
I can answer that in two words: No Focus.
As humans, we focus on what’s important to us. If your finances are not a priority to you, you’ll spend money on stuff you don’t really value.
A budget helps you stay focused on your priorities. When you make the effort to follow a spending plan that supports your goals, you will be very intent on making decisions that will lead you to success. Every time you update your budget, you’ll be mindful of how each financial decision impacts your progress.
Your budget is there to help you remember what really matters. In times of doubt or discouragement, you can look at your spending plan to see how much closer it’s gotten you toward your goals.
How to use a budget to make your personal finances a priority:
- Use a budgeting app on your phone that you can access whenever you’re tempted to make an impulse purchase
- Keep a printout of your budget somewhere you’ll see often, so you’re always reminded to make wise financial decisions
- Have positive conversations about your budget with your partner or trusted friends
#11 A budget helps you stay on target with your financial goals
As mentioned before, a good budget can help you decide on relevant long-term goals and a realistic timeline to achieve them. Once you start working toward these goals, your budget will also act as a guide that keeps you on track.
With a solid spending plan, you can forecast months in advance to ensure you’ll hit your financial target on time. You just have to calculate how much money you need to save or spend every month to make your plan work.
For example, if you know your $450 car registration is due in 3 months, just divide that amount by 3 to determine your savings goal of $150 a month. Then, make adjustments to your budget so you can put that money aside for each of those 3 months.
This might mean you decrease your food category by $50, your entertainment budget by $50, and your clothing expenses by $50.
(Another idea is to find opportunities to generate more income. Perhaps request more hours at work or pick up a temporary side hustle.)
Your budget is like the directions for how to get to your desired objectives. Once you decide on a goal, just break it down into smaller steps that you can work into your budget. Then, just follow the roadmap by sticking to your budget each month. When you do, success is inevitable!
How to use your budget to achieve short-term goals:
- create some reasonable 3 to 6-month budget goals (e.g., sticking to a conservative debt limit, paying off more debt, saving for a vacation, etc.)
- break down that savings goal into the number of months you need to achieve it
- include that monthly amount as a category in your budget, adjusting other areas as needed
#12 A budget will help you retire on time
For all you late savers out there, building a retirement fund should be priority numero uno. A budget is one of the most important tools you can use to get on track with retirement savings.
Spending wisely today will help you save for the future. Following your budget will help you live comfortably below your means and still have enough left over to build a sufficient retirement fund.
Review your spending plan to find those areas where you can make sacrifices today, so you can build a nice nest egg for your future. This will be critical for your financial security once you’re retired.
Your budget should include a category for investment contributions. Be sure to put away a specified amount from your income every payday into a 401(k), IRA, or another retirement fund of your choice. The sooner you can make these investments, the faster your retirement savings will grow with the help of compound interest.
You can make this easier on yourself by automating your contributions. Have your employer directly deposit a percentage of your income into your fund, so you never even see the money. Before you know it, your savings will be substantial!
How to use your budget to build your retirement fund:
- trim your expenses and discretionary spending to free up more cash for retirement savings
- include a category for retirement savings and automate contributions into a separate investment account
- increase your contributions periodically, as your income increases or expenses decrease
#13 A budget builds the self-discipline required for retirement living
Unless you want or need to continue working into your later years, retirement living will be funded with your savings, social security, and possibly pensions. You may also receive other income, such as a life insurance payout or an inheritance.
With your earning years behind you, you’ll need to be very careful with how you manage your finances to ensure that you don’t run out of money.
More than any other time in your life, living within your means will be crucial for having financial security. Getting in the habit of following a budget while you’re still working will prepare you for handling your money wisely in retirement.
It’s best to learn how to exercise budget control with your finances now, rather than wait until you’re retired. Get used to making sacrifices and resisting impulsive purchases, so these disciplines will be second nature later on.
Otherwise, you may run out of savings and your children will need to support you. Don’t let that happen.
How to use a budget to prepare for retirement living:
- create a “retirement” version of your current budget to identify those expenses that will increase or decrease once retired
- create budget goals that will help you be debt-free (including your mortgage) by the time you retire
- include a health expense category in your budget; even if you don’t have any medical bills, you can contribute to a Health Savings Account to save money for health care in retirement
#14 A budget is a neutral tool for communicating with your partner
Anyone out there married to someone who doesn’t get your money habits? Maybe you’re a saver who gets frustrated with your spending partner. Or perhaps you’re the spender always hiding receipts from your thrifty spouse. Either way, your approach to budget management will probably be quite different.
This is common among marriages and makes money conversations difficult, uncomfortable, and sometimes heated.
Budgeting in marriage creates a neutral ground where you can both discuss your financial values with each other. It allows you both the opportunity to contribute to your money management and plan your future together. Then, you can minimize any heightened emotions by letting the numbers speak for themselves.
When you make money discussions a common thing, you’re being proactive instead of reactive. You’re working together like a team, both on the same side.
Here are three ways a budget can minimize financial arguments, hold each person accountable, and improve money conversations with your partner:
- commit to a weekly or monthly budget meeting together, where each has a planning role, so these conversations become normal
- carefully consider each budget request, no matter how you feel initially
- create together the plan of action you’ll take to achieve financial goals and track your progress so you can celebrate your successes as a couple
#15 A budget provides flexibility, freedom and financial control
Many people are turned off by the word “budget” because they feel it restricts them from using their money the way they want.
The opposite could not be more true.
Following a budget means you’re taking control of your finances. Within that control, there are boundaries you set so you don’t fall into a financial crisis. This way, you can enjoy all of the freedom and flexibility you want (within the boundaries you set), and still be assured that your spending decisions are supporting your goals.
Maybe one month you want to allocate more money toward entertainment. If this is important to you, then you should! Or, perhaps you need to save up for an upcoming purchase. By adjusting your budget so it reflects what you value, you can avoid overspending.
Your budget helps you take control of your money and work toward financial freedom, so you’re not imprisoned by poor financial choices.
Here are three ways you can maintain flexibility in your budget:
- keep a “miscellaneous” or “spontaneous” category in your budget for those occasional unplanned purchases
- make adjustments to your budget details every month so you account for any uncommon expenses
- review your budget once every 6 or 12 months, to make sure it still reflects your priorities and goals
#16 A budget can align your spending with your values
Unless you’re raking in the millions, you live on a limited income. This means your money will eventually run out if you keep spending it. So, it’s important to prioritize your spending and use your money for those things that matter most.
A budget can help you differentiate between what you truly value, and what’s not that important. When you learn to manage your limited resources, your priorities will always rise to the top of the list.
Keeping a budget is a great way to align your spending decisions with your values. This is a great way to distinguish needs from wants, and to minimize mindless spending.
Here are three ways you can use your budget to align your spending with your values:
- discuss with your partner the values you both want reflected in your budget
- allocate an appropriate amount to each budget category, based on its priority
- don’t pass judgment on what you deem “valuable”; include eating out with friends or going to the movies if these things truly add value to your life!
#17 A budget helps you live within your means
As mentioned earlier, a budget acts like guard rails for your finances. It keeps you within safe borders so you don’t fall into a financial crisis.
When you stay inside those boundaries, you learn to live within your means. Without them, it’s too easy to overspend, create excessive debt, and spend money you don’t have.
A good spending plan provides the structure to avoid lifestyle inflation while still having a satisfying life and achieving your financial goals. This means less stress and more confidence in your future.
How to use your budget to live within your means:
- make sure all of your monthly expenses are paid with your cash income (paychecks, monetary gifts, tax refunds, etc.)
- always include a savings category for emergency expenses in order to avoid debt
- allocate realistic spending allowances for every category to prevent going over budget
- differentiate your needs from your wants to make smart budget cut decisions
The importance of a retirement budget
Creating a budget for retirement is an important component of your long-term financial plan.
Without planning how your savings will cover your expenses, you may get into a sticky situation where you run out of money. Then, your kids may have to step in and start supporting you.
Here are 3 smart reasons you need to create a retirement budget *before* you stop working.
#1 You can determine a realistic savings target
Many people ask the question how much will I need to save for retirement? You can answer this question for yourself by creating a forecasted retirement budget.
Using your current expenses as a starting point, calculate (separately) what your essential and nonessential costs are over one year. Think of your essential costs as those that are fixed, like housing, utilities, food, insurance, etc. Nonessential expenses are typically variable and more flexible, such as entertainment, travel, or dining out.
Be sure to remove expenses you know for certain will be obsolete by the time you retire. This could be costs such as private school tuition, car payments, or other debt that’s been paid off.
You’ll also need to include those expenses that will arise or increase due to retirement. This will likely include health care, but possibly travel or newfound hobbies as well.
Multiply these estimated annual retirement expenses by the number of years you expect to live in retirement. (Many experts recommend you plan for *at least* 30 years if you retire at 65!)
Now, you have a target to shoot for. If you’ve fallen over in your chair, keep in mind that this is just a forecasted guesstimate.
The great benefit of figuring out a retirement budget now is that you can adjust your current budget to achieve your savings goals by the time you retire. So, if your target seems overwhelming and unattainable, remember that you are the one in control!
You have options to expand your capacity to build savings. By increasing your income and decreasing your expenses, your savings will grow faster. The key is being open-minded, willing, and committed.
#2 You can be confident your savings will last
Being in control of your finances during retirement is the key to ensure your savings will last the remainder of your life.
There will be circumstances in your later years that you have no control over, such as health issues or the loss of mental or physical abilities.
This is why it’s so important to keep your finances in check through retirement. Having a budget will keep you on track so you don’t run out of savings. It will give you a sense of consistency and predictability as your life continues to change and progress. Consequently, you’ll have peace of mind knowing you have financial security.
You don’t want to end up in a situation where you’re relying on others to take care of you (think: kids, government). Take the time to create a retirement budget today, so you can be prepared to maintain your financial independence for the remainder of your life.
#3 You’ll be mindful of the unique financial circumstances retirement brings
Retirement will be like no other season in your life, and I hope you imagine it with excitement and anticipation!
You will have amazing opportunities you’ve never had before. And, you’ll also have issues you’ve never had to deal with either.
Creating a retirement budget will help you identify and be mindful of the changes you’ll inevitably experience.
It’s important to consider how your retired life will be different physically, mentally, emotionally, spiritually, and relationally. And, of course, financially.
Your savings are going to support the endeavors you wish to pursue in your golden years. Maybe this means traveling more to visit your grandkids, or buying a cabin in the mountains where your whole family can create lasting memories together.
Your money will also be your safety net when a health crisis hits or you lose your spouse. Maybe your husband has to go into a long-term care facility, or you’re diagnosed with an illness that requires extensive treatment.
The only thing predictable about life is its unpredictability. It’s wise to be ready for whatever life may throw at you.
By taking the time to create a retirement budget now, you can be intentional about how you’ll address these future circumstances financially. You can plan for each possibility with intention, so you’re prepared for the unexpected.
How to create a budget template
I hope I’ve convinced you of the important purposes of budgeting, the value it provides, and the benefits you’ll gain.
But, if you’ve never followed a spending plan before, you may be wondering how you create a budget template.
For a detailed tutorial, you can read my post about making a zero-sum budget. But, for the sake of convenience, I’ll provide simplified instructions here:
- Add up the total of your monthly income sources
- Create budget categories that will account for every expense you have (this includes emergency and retirement savings, as well as charitable giving)
- Allocate a budgeted amount to each category based on your current bills and spending habits
- Balance your budget so that the total of your income equals the total of your expenses (giving every dollar a job means you should have $0 left at the end of the budgeting period). If you subtract your expenses from your income and get a negative number, you’ll need to do a little expense trimming. If you get a positive number, put that extra money in the savings category!
- In the first few months, you should track your spending and update your budget several times a week. After a while, you’ll have a good grasp of where you’re at in your budget without so many updates.
The best way to keep your finances organized and accurate is to use a budget template for every budgeting period. Using the same digital or printed budget document every month will provide consistency and give you an overall view of how well you’re staying within your budget.
You can create your own printable budget template in a word processor like Microsoft Word or Google Docs. You could also create a digital spreadsheet that automatically updates totals using a spreadsheet program such as Microsoft Excel or Google Sheets.
If you don’t want to take the time to make one yourself, there are many free budget templates you can find online.
How to stick to a budget
As you figure out a budget and decide on a template to use, you’ll probably feel some excitement about how you’re finally going to get your finances into shape. And, it is exciting – just knowing you’ll be able to pay off your debts and save more money!
But, a budget doesn’t work unless you stick to it. Which, might be harder than you anticipate.
Thankfully, there are some steps you can take to make budgeting easier to stick to.
When you start to develop a new habit, your brain will fight to stick to what it already knows. So, set up some reinforcements to give yourself extra support.
This might mean cutting up credit cards, unsubscribing from marketing emails, or even taking a different route home to avoid driving by Target.
When you remove the temptations, you’ll find it easier to stick to your budget.
Follow a monthly meal plan
A great way to stay within your food budget is to create a monthly meal plan.
Write down what meals you’ll prepare each day for the next 4 weeks. This meal plan will guide your grocery shopping list so you don’t buy things you don’t need, and you won’t be trying to figure out what to make for dinner after a long day at work.
No more last-minute fast food runs!
Automate your savings
The easiest way to stick with a savings goal is to automate your contributions.
With a retirement fund, you can have your employer set up a separate direct deposit into a 401(k). If you have a savings account, you can either set up another direct deposit to that account, or automatic transfers from your checking account.
The goal is to get that money into a savings vehicle as quickly as possible, preferably before you even see it.
Automate your bills
Through your bank’s website, you can set up an automatic bill-pay for your fixed expenses.
For those bills that are the same every month (mortgage, insurance), just set it and forget it. For bills that vary (utilities, credit cards), you can schedule those bill payments on the first of every month.
Minimizing the actions you must take to keep your finances under control is a great way to improve the chances of success with your budget.
Review your budget daily
Do a quick analysis of budget activity every day until you feel confident you can stick to it without daily review. Recording your daily expenses and making necessary adjustments as you go will help you stay on track.
Eventually, you’ll be able to create monthly detailed budgets that are more accurate and require fewer changes.
Make it work for you
Your budget will not be like your parents’, your neighbor’s down the street, or Dave Ramsey’s. The budget you create needs to reflect what’s important to you, and fit into the life you want.
So, make it as simple or as complex as you like. Use whatever method you prefer. Employ any tool you find helpful. If you try something that leaves you uninspired, try something else.
It’s your money, and it’s your budget. Make it work for you.
Give yourself grace
Learning to budget your money takes practice, and there will be times when you just blow it.
Here is my advice to you: learn from your mistakes, forgive yourself, and move on.
You won’t get it perfect every time. Your budget will be an ever-evolving tool that you learn to master over time. It will be unique to your finances and circumstances, and you’ll make adjustments to it whenever you need to.
Remember … you’re the one in control. When you keep this in mind, you’ll be less likely to give up on budgeting.
Are there disadvantages to budgeting?
As we’ve seen, there are many benefits to following a budget. But, with that said, budgeting requires intention, and being honest with your financial situation. This can be a little uncomfortable and inconvenient – especially as you’re getting used to following a budget.
Here are five things to be aware of if you’re struggling with your budget. Just know that these experiences are normal, but shouldn’t keep you from keeping a budget.
- You’ll need to carve out time every day to review your budget. You might feel this is time-consuming and inconvenient because of the increased level of effort required. But, once you get more in touch with your finances, you’ll be able to scale back.
- You might feel restricted. I remember when my friend got married and her new husband laid out their first budget. She said she felt like he was trapping her inside a big lid. When you’re used to spending freely, you might feel a little frustrated with your new boundaries. Just keep going! Once you see your savings grow, you’ll start to feel differently.
- You might feel a little hopeless. A budget forces you to come face to face with your financial truth. When you do, you could think it’s not worth trying, and you’ll likely feel a conflict between planning and motivation. Being under a pile of debt or making insufficient income can make a budget seem pointless. But, think of the alternative. If you never take control of your finances, you’ll never get out of the rut you’re in.
- You’re forced to communicate with your partner. This can be uncomfortable, especially if you’re on opposite ends of budget objectives. However, if you want to be successful with your finances, you need your partner’s cooperation. It might be unpleasant at first, but don’t give up on communication. Eventually, those conversations will seem normal.
- You might experience disappointment. A budget will cause you to be more focused on your financial goals. This can be exciting … unless you don’t achieve them. Don’t let this heightened awareness and anticipation scare you from trying. Even if you don’t reach your goals, you’re still making progress. And that’s what counts the most.
The purpose of budgeting is to create the future you want
Every benefit I’ve listed above will help you achieve the pinnacle of all money goals: financial freedom. The freedom to live independently, abundantly, and generously.
With a budget, you’ll have less stress and more confidence about your personal finances. You’ll learn to strengthen self-control and resist overspending. You’ll have a sense of peace because you’re organized and prepared for whatever the future may bring.
A budget will help you get the most out of every dollar you work for, and grow your savings so you can retire on time.
Following a budget will guide the goals that reflect your priorities – like living in financial security throughout retirement, and leaving a financial legacy for your loved ones.
A budget will give you a common focus with your partner, so you can both learn to live within your means and work toward your financial goals together.
A budget provides the flexibility, freedom, and control you want with your finances, so you can create the life you want.
Are you ready to take control of your finances? Create a budget, and turn your dreams into plans. The best time to start is now!
Other posts you may be interested in:
- How To Save $5000 In A Year
- 11 Effective Ways To Stay Motivated With Your Goals
- The Purpose Of A Budget: 17 Powerful Benefits
- 3 Smart Reasons To Put Savings Before Debt
- How To Live On Last Month’s Income (and Why You Should)
- 14 (Mostly Free) Online Money Management Tools
- How To Live Within Your Means (and Still Be Content)
- Financial Health Checkup: 7 Steps To Boost Your Fiscal Well-being
- How To Escape Debt With A DIY Debt Management Plan
- The Zero-Sum Budget Resource Guide