Do you wish you had more money? Who doesn’t!
Although you might dream of winning the lottery or investing in the next Apple computers, chances are that you won’t be the next Bill Gates (Sorry!)
But that’s no reason to despair. Creating a personal budget is one of the best ways to maximize the money you do have and create a plan that prioritizes your spending for the future.
Many people think that budgeting means giving up stuff you enjoy doing, but it’s actually the opposite! When you create a personal budget, you’re clearly allocating your money for the things you want to do – based on your financial limitations.
By creating a personal budget, you can save yourself tons of headaches that come with overspending and ending up in debt. This, in turn, frees up more of your money to spend on things you enjoy rather than being surprised by unknown expenses in the future.
Although budgeting does require a little bit of extra work, it’s really worth the time and effort! Here are some of the most significant benefits of creating a personal budget:
Budgeting Gives You Control
When you sit down and create a personal budget, you’re taking control of your money and not letting your money control you. However, it’s important to note that any sound financial plan should be flexible so you’re able to adapt in case of emergencies, such as a medical expense or an urgent vehicle repair. In fact, that’s precisely what budgeting is for! By creating a personal budget, you’ll save yourself the stress of suddenly needing to adjust to a lack of funds because you failed to plan how to spend appropriately.
A personal budget will also give you control over deciding if you’d like to sacrifice short term spending, such as visiting Starbucks every day, in exchange for a long term goal, like going on a cruise or buying a new TV.
Budgeting Keeps You Organized
When budgeting, we recommend using a template or an online app to keep your finances organized. By writing out all your monthly expenses including cable, internet, mortgage/rent, insurance, groceries, gym memberships, etc., you’ll make it easy to see exactly how much you need to spend on individual services. Not only does this help you stay organized in terms of monthly expenses, but if one of your bills goes up, it makes it much easier to spot it. For example, if you’ve budgeted $40 a month for insurance and your next bill is $53, you’ll be able to quickly notice the change because you have everything clearly written out.
Creating a personal budget that’s plainly written down will also help you be proactive. For instance, because you saw that $13 increase in your insurance bill, you would be able to call your insurance company ASAP to try and haggle a better rate.
Budgeting Builds Better Habits
Once you’ve created your personal budget, you’ll need to stick to it! By working hard to make sure you’re spending your money according to your budget, you’ll build new and better spending habits. Over time, you will find that these habits become easier and easier to maintain.
Part of working within your budget means shifting your expenses from unnecessary categories to the most essential household categories. This will free up your money for the most necessary expenses, as well as for debt reduction. By creating a personal budget and building better habits, you’ll begin to see real financial progress.
Budgeting Manages Debt
Here’s a surprising statement: Not all debt is bad!
Taking out a mortgage or having a student loan can be constructive forms of debt that could improve your financial standing in the future. However, it’s imperative to fully understand your debt in order to keep in control of it. This means knowing your interest rates, terms, and the length of your loan.
Budgeting not only provides a clear picture of what you need to pay down your debt, but it also helps you understand how much debt you can afford. By creating a personal budget, you’ll be able to determine how much of a debt load you can take on without getting stressed. It can even help you figure out if taking on debt is worth it at all.
If you already have debt, a personal budget will help you find which areas you can reduce your expenses so that you can afford to start making extra payments towards that debt.
Budgeting Gives You a Better Life
These just scratch the surface of the many advantages to creating a personal budget. From being in control of your finances to staying on top of your bills to managing and paying off debt, budgeting always “pays” off. When you create and stick to a personal budget, you’ll find you have much less stress in your life, be able to save some extra cash, and move towards your financial goals faster.
Creating a personal budget does require you to sit down and take a little time, especially in the early months, but once you’ve become accustomed to living within your budget, you’ll see results that you never even imagined.
Of course, creating your monthly budget is just the beginning. Remember to schedule monthly budget reviews and stick to them if you want to see your financial health increase in line with your goals.
The Number Works Can Help Your Business Budget
We’re big fans of creating a personal budget for your everyday finances, but we also understand the importance of budgeting when it comes to your business too! If you’re a small business owner or a creative entrepreneur, we can help you grow your profits and budget all your expenses.
So, don’t hesitate to reach out to The Number Works for services including cloud-based bookkeeping, full cycle accounting, financial statement analysis, and strategic tax planning. Let’s work together to take the pain away from managing your business’ finances.