While making a budget can be a tedious process, I believe that everyone should go through it at least once. Not setting spending goals can be easier and less stressful at the time, but setting those goals will put you in a better position down the line, and make you more aware of your personal spending habits.
What follows are three reasons why everyone should make a budget at least once.
Making Goals
You can’t hit a spending or savings goal that you never make. Budgeting is something that requires you to set a goal. To complete a monthly budget you must end up with a total budgeted monthly spending. Not only that, but you should aim to break that down into every different category that you regularly spend in. Most budgets will contain housing, transportation (car payment, insurance, and gas), utilities, food, clothes, and entertainment at the very least.
Budgeting can be many peoples’ first exposure to setting a financial goal. Achieving this goal, even if it may seem small, will empower you to set and achieve future financial goals.
Finding Expenses You Forgot About
When is the last time you thoroughly checked your credit card statement? A week ago, a month, longer? I have heard stories of people budgeting and then monitoring their expenses for the very first time. Some of these people found subscriptions they thought were cancelled, bank fees they didn’t know were being charged, and even fraudulent purchases that had slipped through the cracks noticed.
Just the act of monitoring expenses can save you money if you find something that just isn’t how it is supposed to be.
Facing Your Bad Habits
While some people may budget for the first time and be surprised where their money goes, I think most of us have some sort of an idea about what we spend our money on. The problem is that none of us actually want to see how much money we spend eating out, or going to sporting events and concerts. We would much rather just kick the can down the road a bit longer.
Not only is this a bad idea, but it is much more rewarding and comforting to know exactly how much you can afford to spend and then picking and choosing the things that you really want to spend it on.
Maximize Savings
Most people wait until the end of the month to save because they don’t know how much money they are going to spend. If you budget for yourself and track your expenses for a little while then you can become much more comfortable with the idea of paying yourself first, or saving money at the beginning of the month.
By keeping your finances front of mind you may find yourself becoming thriftier and more conscious of spending. You’ll likely want to find easy ways to save money and may even pick up a second income.
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