No doubt about it, you need a budget. But, for many, budgeting sounds like a daunting task. While it may be the last thing on your to-do list, it can transform your finances overnight. So, even if you’re dreading the task of reviewing your expenses and income, creating a budget is a must.
That said, here are six other reasons why you should craft your budget today.
Become a Master of Money Management
You need a budget so you can become a master of managing your finances. By creating a budget, you’re telling your money where to go. Essentially, you are taking complete control of your money and showing it who’s boss.
Taking charge of your finances means getting organized. For example, to make organizing your finances easier, you may want to consolidate your checking and savings accounts. If you have multiple savings and checking accounts that don’t serve a purpose, it will be easier to tend to them when they’re in one place. Doing this will reduce your financial “clutter.”
This is a great time to review all of your account balances. Knowing exactly what you have in savings and in investment accounts will help you set goals and track your progress. You might even surprise yourself at how well you have done thus far without having a budget.
Keep Your Eye on The Prize
You need a budget to set and accomplish your goals. If you don’t take control of your finances, and throw your money at every shiny object, how will you ever buy that trip to South Africa or save for a down payment on your dream home?
Crafting a budget forces you to define and map out your goals, save money, keep track of your progress, and maybe even make your dreams come true. But, if you’re just starting, it might sting a little knowing you can’t indulge in every social event with your friends or spend aimlessly on a new cashmere sweater. However, the process will be worth it. You’ll need to remind yourself what you’re working towards. By keeping your goals top of mind, it will be a lot easier to pass up a spending opportunity.
To ensure you keep your eye on the prize, you can create several sticky notes with your financial goals on them. You can place them around your home or in your car. The point is, they must be visible to you throughout the day. So, whenever you’re tempted to splurge, you can refer back to your sticky notes.
Ensure You Don’t Overspend
Many Americans find themselves spending money they don’t have. The average American household credit card debt hovers around $5,700. In the past, before credit cards were available, it was easier for people to live within their means. If they had money at the end of the month and were able to pay their bills and save some cash, they were adequately managing their finances.
Now, with the use of plastic, it has become a lot harder to track our spending habits. We can spend frivolously without seeing a dent to our checking or savings accounts, which can become a tricky predicament if you’re not careful.
Therefore, you need a budget to ensure you don’t overspend. By creating and sticking to a budget, you’ll need to know exactly how much money is coming in and going out. While tracking your spending and crunching numbers isn’t nearly as fun as splurging on a new pair of kicks, budgeting will help you avoid living beyond your means. Even though it may be a drag, in the beginning, you’ll be able to feel confident knowing you have your finances under control.
Retire Blissfully Happy
Spending money responsibly, never veering from your budget, and avoiding debt at all costs are components of good money management. However, you also need to account for planning for the future or your retirement.
That said, you need a budget to retire blissfully happy. You’ll want to build investment contributions into your weekly, monthly, and quarterly budgets. You can set money aside to contribute toward retirement accounts like your 401(k) at work, your IRAs, or other retirement account vehicles. After a while of contributing to your retirement accounts, you will accumulate a nice little nest egg. Even though you may have to sacrifice now, it will be worth it in the future.
After all, wouldn’t you rather spend your retirement days basking in the sun on the beach instead of working into your retirement years to make ends meet?
Prepare for Emergencies
Life is full of surprises. Whether good or bad, there are unexpected events at every corner. Often some of these life-altering events can cause financial distress. Whether you were laid off, become ill, go through a divorce, or have a death in your family, you may have to pony up some cash to make sure you stay above water.
Therefore, you need a budget that includes emergency fund contributions to help you prepare for any unexpected life events. You should aim to contribute at least three to six months of your current expenses into an emergency fund. Of course, it may take some time to save up this amount of cash, but it will help you feel more financially secure knowing that you have a cash reserve if something were to go awry.
So, to not feel overwhelmed, start by contributing $10 to $30 per month. Slowly building up your emergency fund will help alleviate the financial stress of pouring all of your extra cash into your reserves.
Cut Bad Spending Habits
From too many trips through the Starbucks drive-thru to overspending on your cable package, there are plenty of ways we overspend without even noticing. Crafting a budget will help you take a closer look at your spending habits and determine where you might be spending a little too much money.
You need a budget to monitor if you are making smart money decisions. Do you need to purchase ten pairs of jeans or have six different streaming channels? By creating and sticking to a budget, you can begin to identify areas of opportunity where you might be able to slash some expenses.
Sleep Well at Night
Do you toss and turn at night worrying about your finances? According to a recent CreditCards.com study, 65% of Americans lose sleep due to money worries. Those who can’t sleep due to money troubles are letting their financial issues control their lives. If you want to take back control of your finances and sleep soundly, it’s time to create a budget.
Therefore , you need a budget so you can get some well-deserved shut-eye. When you budget wisely, you’ll have peace of mind knowing exactly how much money you have and where your money is going.
Best Ways to Create and Stick to a Budget
Now that you know you need to start budgeting, you might be wondering where to begin. Here are a few ideas that can help you successfully manage your new budget.
· Use a Budgeting Tool: Using a budgeting tool like Qube can help you create positive spending habits and stick to your budget. Which, in turn, helps you achieve your financial goals. With Qube, you use digital money envelopes for each one of your budgeting categories. By using a digital envelope system, you can identify areas where you might be overspending and make adjustments.
· Review and Track Your Progress: Like any important endeavor, it’s important to record and measure your progress to make sure you are staying on track. Schedule regular budget check-ins to evaluate your progress.
· Looks for Savings Opportunities: With a little work and research, there are savings opportunities at every corner. May be there more affordable food or clothing brands, comparable in quality to more expensive brands, that you can switch to. Make the switch. There’s always a way to save you just have to be willing to look for opportunities.
· Make Adjustments: To make sure your budget is continuing to work for you, your lifestyle, and goals, make it a point to review it every few months, making any necessary adjustments.
· Get an Accountability Partner: Creating and sticking to a budget can be a challenge. You don’t have to go it alone. Get an accountability partner for support (and accountability). Not only will this increase your chances of success but it will bring you and your accountability partner closer.
· Automate Your Bill Pay: Manually sorting through your bills, and paying them, can be time-consuming. Not only that, but missing payment can be costly if you’re not careful. Automating your bill pay is a great way to save time and ensure you never miss a payment.
It’s true; you need to start budgeting today. Though the idea of creating a budget might seem daunting at first, following these tips on how to spend smarter and organize your finances will allow you to take charge of your finances and create a financially secure future for you and your loved ones.