Ok, I’ve talked about budgeting enough times, and I think people getting tired of repeating the same topic over and over again. But at times, the topic you are talking about is so important that if you don’t emphasize it hard enough, it will lose meaning. One such topic is budgeting, and instead of me repeating on how to go about creating a budget, it will probably be wise to show the importance of budgeting in order to be able to appreciate its usefulness in fulfilling one’s financial goals. The following article by Laura C Reis gives 10 good reasons why you should set up a budget.
Being on a budget sounds about as fun as being on a diet. The definition of a budget is an estimate, often itemized, of expected income and expense for a given period in the future. The definition of a diet is food and drink considered in terms of its qualities, composition, and its effects on health. Boring, who wants to sign up? But both budgets and diets have gotten a bad rap. Below are ten reasons to be on a budget. Surely one or two will resonate with you. Take some time to set up a budget for the new year and enjoy the benefits!
- A budget shows all your sources of income. This includes jobs, tips, bonuses and child support. The first thing any budgeter will tell you is you have to know what is coming in. Gather your sources of income and list them. Add them up. You may be surprise at the amount you have coming in each month.
- All your expenditures are listed. How much are you spending each month? This includes cash, check and credit card charges. Gather all your expenditures. Do not forget those periodic costs that you pay quarterly or yearly. List these on the same page that you have your sources of income. Add these up. You are doing great if you have a positive number left!
- Create a plan to reduce and eliminate debt. If you do find that your expenditures are more than your income, that’s ok. Now you know how much and can create a plan. You can contact those you owe, and let them know your plan. They may be able to help you reduce your debt faster.
- Categories let you know how much you to spend on necessities. Group your expenses by category. Put your household items together, put car and other modes of transportation in another, be sure to have a category for medical, savings and entertainment as well. Divide up your income across these categories. Don’t spend more money than you have in the category.
- Balance your debt reduction plan with an entertainment/fun category for you and your kids, to chillax. As you pay down your debt, don’t put your life on hold. You may have to find some creative ways to have fun, if you have a lot of debt. Approach it in a way that makes the challenge fun. For instance, take a 5 or 10 dollar bill, and ask your kids how many different ways they can come up with for the family to have fun on this amount of money. Write them down, and then make plans to do them. There also lots of events around town that have no cost at all. You will find them if you look.
- Savings plan for unexpected events and/or big items like cars, house and trips. Now that you have a budget, you can set money aside for bigger things. Nobody ever plans for accidents or illness, but they do happen. So know that the savings category is for these events. Just in case. Then there are down payments for a home or a new car. Or car repair. You can use this category for trips if you like to travel.
- Plan for the future, put money aside for 401K, and or IRA’s. The cost of living goes up as you get older. Make sure you have a category for when you want to slow down, and enjoy a bit. If you have an employer who matches your contributions, take advantage of this benefit. Otherwise, it’s like leaving money on the table. The sooner you set this up in your budget, the longer the money has to grow. Teach your children to do this as soon as they start earning money.
- Have money for college and other big dreams. Do you want your kids to go to college? Do you want to go to college? What dreams do you have you thought were impossible to achieve? Now that you have a budget, you can put a category for your dreams. It might take a bit, but isn’t later better than never?
- Creates an environment to allow for more choices. Being on a budget allows you to be ready for opportunities as they arise. A lot of people are in a financial bind right now. But not everyone. Those who have been on a budget, are able to pick up some great bargains right now. Wouldn’t you like to be one of those people?
And the number 1 reason to have a budget is…
- Peace of mind. Don’t you and your family deserve it? Knowing that you’ve created a plan and are following it, will let you sleep at night. You won’t have to worry about if you have enough. You know you do.