What is a Budget? And What is Budgeting?
A Budget is a spending plan. The plan enables an individual to determine in advance your expenditure and whether you will have finances to cater for them. If you don’t have enough money to do everything you would like to do, then you can use this planning process to prioritize your spending and focus your money on the things that are most important to you.
Budgeting is a process of creating a plan to spend money. If you want to attain financial security then budgeting is the way to go.
Budgeting is an important financial habit that helps you make financial decisions.
Budgeting helps you plan for your income, track your expenses, control your spending, pay your debts, prepare for emergencies and also helps you to stay focused on your long-term financial goals. In summary we can say, a budget is a component of proper financial management. If you have never had one before this article is for you.
In this article, we are going to look at the 6 Importance of Budgeting and why it is vital for your financial well-being.
1. Budgeting Helps You Control Your Spending
Spending your money without a budget gives you an opportunity to spend beyond your means since you do not have anything holding you back. You may be having an idea of how much you want to spend, but without the exact amount you may end up losing your spending control.
Before I started budgeting, I would get into a supermarket, buy many things, most of which I dint plan for. Later when I started budgeting, I realize some things can be avoided and money can be saved instead.
We can then say, budgeting is important if you want to keep a close eye on your daily spending habits, understand the impact of seemingly small expenses, and take control of your spending.
2. Budgeting Keeps You on Track for Your Financial Goals
Setting financial goals is easy. You just can think of something you want to achieve and set a timeline to achieve it. Anybody can plan. However, between setting goals and achieving them, there is commitment. You need to stay focused, stick to your plan and define your process clearly. Developing a clearly defined process requires a budget that’s gives you the whole picture toward your achievement.
A budget creates boundaries on your financial behaviors so that you remain focused, stay on track and achieve your life financial goals.
A budget helps you to frequently commune with your goals and evaluate your progress. In other words, it is a commitment to your goals.
3. Budgeting Helps You Save Money
Budgeting helps you eliminate waste and in return increases the amount to save. In addition, budgeting hold you accountable for any financial decision you make, keeping you from spending it all. In other words, budgeting enhances individual saving habits.
4. Budgeting Helps You Find Financial Contentment
Budgeting helps you focus on your own decision, your own finances and your own finances.it is important since you will focus on what you have and your ability. Every time you put income and expenditures in your budget, you commit yourself to stick to them. A budget helps lose complete focus on what other people are do with their money and how they can help you. financial contentment is a crucial element that keeps you from spending money you do not have.
5. Budgeting Keeps You Organized
Disorganization is another one of those words that doesn’t mix well with personal finance. And the longer you live without a budget, the easier it becomes for your financial life to get messy. Between all your monthly bills, debt payments, and all your other expenses, things can just slip through the cracks. Before you know it, you are struggling to get by, and stressed about how you are going to make things work. In other words, it’s easier to live on a budget and keep your finances organized than it is to try to get your finances in order after you have allowed them to get disorganized.
6. Budgeting helps Prepare for Emergencies
Life is full of unexpected occurrences, some better others worse. Such occurrences may lead to financial drawbacks especially when they get you as a surprise. This is why budgeting for such surprises is paramount. You should therefore include emergency fund in your budget to cater for such emergencies. Extra money in the kit will ensure you do not get into debts once such things happen. For most of us the emergency fund should include 6months living expenses. To avoid straining your net pay, the kit should be built up over time.