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What is the purpose of budgeting anyway?
If you still haven’t made a budget for your finances, I can guarantee you’re wasting money – maybe a lot. Maybe enough to make the difference between a paycheck to paycheck lifestyle and financial freedom.
Money can be tricky and fleeting when you don’t maintain control of it. It can disappear through small cracks and easily slip through your fingers in times of spontaneous and impulsive behavior.
At the beginning of the month, your financial forecast can look strong and you’re certain there’s enough to cover all of your expenses. Two weeks later, your account barely has a pulse.
How does this happen? Where does it all go? It seems like a mystery. But, it doesn’t have to be.
With a budget, you could tame your unruly finances and tell them to do exactly what you want. You can train your money to follow your directions and have consistent results every month. You could have complete control.
When you follow a budget, you essentially become a money manager. You take an intentional, hands-on approach with your finances. And, when you do, you’ll start to see significant changes.
The greatest purpose of budgeting might just be to control where your money is going, so you can maximize the financial benefits for your life.
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. And, your finances will be transformed.
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?
One 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 period of time. You could create a budget for a week, a month, or even a year. You could even have a budget for a limited amount of time until you’ve saved up enough for a vacation, a car, a new home, etc.
When you create your spending plan, you assign every dollar a job to do. Remember – the whole point is to control where your money is going so it can give you the greatest benefit. You want to identify its highest potential and maximize your income.
These “jobs” can include household expenses, food costs, discretionary spending, 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 assigned to each category.
You can also think of a budget like guard rails to your spending. It will keep you within safe 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.
In addition, you’ll have confidence in your financial future. You know you’re making the choices that are getting you closer to your goals, such as getting out of debt and retiring on time.
Thirdly, you can think of a budget as 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.
Budgeting, as a tool, will help you monitor your money more closely. You can analyze patterns in order to improve your financial decisions. You can strategize future planning to increase income and savings.
A tool is only as helpful as the one using it. You can use your budgeting tool 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.
Whether you’ve got millions in the bank or a negative balance, everyone can profit from using a budget. Having control of your finances and aligning your spending with your priorities will always yield positive results. You’ll achieve your goals faster, and attain the financial peace and security you want in retirement.
Now that you know what a budget is, let me answer the question what is the purpose of a budget with these 17 ways one will benefit you.
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.
Here are 17 reasons why budgeting is important, and how a spending plan can change your whole financial future.
#1 A budget allows you to be in control of your finances
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.
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.
You gain freedom from impulsive spending. You take back the power to attain financial security. You become the master of your financial destiny.
Of course, you must be intentional. You must decide what your priorities are, and be committed to upholding them in every spending decision you make. When if you have the self-discipline to follow your budget diligently, you’ll see amazing financial results.
How to maintain financial control with a budget:
- review and update your budget every day 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
Relying only on your memory to keep track of your income and expenses will inevitably result in overspending, lack of focus, and disorganized finances.
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.
And, as you see your finances improve, you validate your decision to follow a budget. You become more driven to follow your spending plan.
How 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 save for emergencies
Many people choose to spend their money first, then save whatever is left. This strategy never works, because there will always be something else to spend your money on.
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 and make sure it gets paid first.
Adding an emergency savings category will help you be intentional about building up enough cash to cover 3 to 6 months of living expenses.
This doesn’t happen by chance, which is why it’s so important to make savings a priority. When you “pay yourself first” then you are assured that your savings will keep growing at a consistent rate. So, when life’s curveballs are thrown at you, you’re prepared to catch them.
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.
How 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 your future 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.
The consistency a budget provides will help you estimate your potential progress over the long term.
All you do is create a forecasted budget, based on your current spending, with adjustments that help get you closer to your financial goals.
You could even create multiple forecasted budgets, that each reflects different scenarios. For example, maybe you want to figure out a budget that allows for the greatest savings over one year.
So, for forecasted budget #1, you calculate how much you could save by selling your car and using public transportation.
With forecasted budget #2, perhaps you decide to drastically reduce your entertainment and dining out budget.
Then, with forecasted budget #3, you see how your finances would change by adding $500 a month to your income while cutting your clothing budget in half.
As long as you can realistically implement these adjustments to your budget, you can get a fairly accurate prediction of your savings over one year. Comparing your forecasted budgets will help you determine the best adjustments you can make to maximize your financial goal.
How to use your budget to forecast financial progress:
- create a monthly forecasted budget (based on your current spending) for at least 6 months into the future
- make realistic adjustments to these forecasted budgets 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 health.
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 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
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 profit. A budget brings into focus those financial decisions that have the greatest return.
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.
How to use your budget to maximize income:
- prioritize your expense categories and identify 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 a rough estimation 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.
Budgeting 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 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.
How to use your budget to fix spending leaks:
- track every expense you make for one month
- add up how much money you spent on unnecessary items like subscriptions, eating out, clothing, etc.
- limit your spending 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. Your spending plan reveals exactly what to expect every month. You know how your income will cover all of your expenses. You have control over where your money is going. Minimizing all of the uncertainty will alleviate a lot of the stress.
The purpose of a budget is mainly based on 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.
How to use your budget to reduce stress:
- 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 every 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 achieve your financial objectives
As mentioned before, a good budget can help you decide on relevant long-term goals and a realistic timeline to achieve them.
Likewise, a solid spending plan can also guide you toward short-term objectives successfully.
Once you’re on a budget, it’s easy to forecast 3 to 6 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, carry out those directions 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., 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 prepares you 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 additional potential 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 control 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.
This is common among marriages and makes money conversations difficult, uncomfortable, and sometimes heated.
A budget can be like 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.
How a budget can improve money conversations with your partner:
- commit to a weekly or monthly budget meeting together so these conversations become normal
- focus on improving the numbers in your budget, not on fixing each other’s faults
- create financial goals together and track your progress so you can celebrate your successes as a couple
#15 A budget provides flexibility & freedom
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. Inside those boundaries, you can enjoy all of the freedom and flexibility you want, 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 work *toward* financial freedom, so you’re not imprisoned by poor financial choices.
How to maintain flexibility in your budget:
- keep a “miscellaneous” or “spontaneous” category in your budget for those occasional unplanned purchases
- make adjustments to your budget 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. Every month, you’re reminded of what you’re working towards, and the weight every spending decision has on reaching your goals. This is a great way to distinguish needs from wants, and to minimize mindless spending.
How to 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 about your future.
How to use your budget to live within your means:
- make sure all of your monthly expenses are paid by 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. There are ways to slow down the effects of aging, but some consequences are inevitable as you get older.
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 will 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 been on a budget before, you may be wondering how you create one.
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 budget period. Using the same digital or printed budget template 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.
If you’ve never taken control of your money and set limits to your spending, you probably have a few poor financial habits to break. You won’t be used to saying “no” to impulsive temptations or living on less so you have more for savings.
Thankfully, there are some steps you can take to make budgeting easier to stick to:
- Minimize temptations. When you start to develop a new habit, your brain will fight to stick to what it already knows. So, you need to set up some reinforcements to give yourself extra support. When it comes to adopting better money habits, this might mean getting rid of the credit cards, unsubscribing from your favorite online retailers, 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. Because food is not an optional expense and we need it every day, it’s easy to go over budget in this category. A great way to set yourself up 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. As you get used to following your budget, you’ll want to look at it 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 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.
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!