The Benefits of Budgeting

Posted: June 20, 2012 in Finances
Tags: , , , , , , , ,

Budgeting. We all know what it is. We’ve all talked about it, but surprisingly that’s as far as most people go with it. The topic seems to only expose itself when a person finds him or herself overdrawn on their bank account or when they realize they have no spending money left and payday is still two weeks away. “I really need to start setting a budget.” This is what is said but not always done.

Some of us have taken the first step and set a budget but fail to stick to it. This is usually because we under-budget and/or leave things out of the budget. A lot of people only budget for their bills and maybe food forgetting to allot for recreation, shopping, pocket money, laundry, toiletries, and other miscellaneous items. Well guess what? It’s never too late to give budgeting another shot. Stop talking about it and be about it! The following are just a few benefits budgeting provides:

  • An overall snapshot of your financial situation: Having a stack of bills and expenses can be overwhelming. It’s even more overwhelming when you store and file them all in your head. When you sit down and lists these things out, whether manually by writing or electronically with an excel sheet, you gain a clearer picture of where your money is going and if any changes are needed as to where it needs to go. It allows you to identify the “why”, the root cause as to why you’re constantly finding yourself short of money or bouncing checks.
  • A realistic approach to spending within your means: You should have a column with expenses and another column with your income. If your expense total is more than your income total, then there is a problem. You have two choices at this time. You can cut back on some things and since you have everything listed out, it should make it easier to identify where you can cut back. The other option is to find a way to get more income to accommodate your lifestyle according to your budget. Only you can make that decision. Either way, the budget serves as a reality check as to what your spending habits are versus what they should be.
  • A tool to outline an ideal lifestyle for yourself given your current financial status: When working up your budget, that is the time to be completely honest with yourself.  It’s important to include all the things you spend money on monthly, no matter how big or small. If you like to shop, create a monthly shopping allowance and add that to the list. If you go out to eat often, estimate how much you spend doing this and put it on the list. If you enjoy clubbing on the regular, it needs to be included in the budget. Sometimes people forget about the things they use regularly like soap, toothpaste, feminine hygiene products (for the ladies), shampoo, etc. I usually group all of this under one entry titled “miscellaneous”. Whether you group it together or list each thing individually, just remember to add those types of things in! They do start to add up! Don’t be afraid to round up when estimating either. By adding every single detail of how you spend your money and overestimating the costs, you are adding a “cushion” to your budget to ensure you don’t overspend. This allows you to maximize your ideal way of living within your current income.

School districts, wedding planners, your job, and even our government set a budget. It only makes sense that you would set one for your individual life as well.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s