6 Great Benefits of budgeting your money

Many people do not create budgets because they don’t understand the benefits of budgeting their money. Others create budgets but fail to respect them.

The hard truth is that creating a budget is the most important decision you will make in your financial planning. That is why I put together this simple guide to help you understand why a budget is important when it comes to managing your finances and financial planning.

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So, what is budgeting?

Budgeting is the process of evaluating your incomes and expenses in an attempt to understand where you stand financially. In this process, you get to understand how your money is made and where it is spent. This helps you make financial decisions that are supported by meaningful and accurate calculations.

During your budgeting process, you put everything together in what is known as a budget. A budget is nothing other than a detailed list that quantifies all your incomes, expenses, savings you are making, future goals, differences, etc. A budget can be simple or complex and they vary from one person to another.

Although it is extremely important to have a written budget that reflects your finances, most people choose not to create budgets. Others create budgets only to trash them a week later.

For this reason, it is very important to understand the meaning of budgeting and why you should adopt this practice. Only then, you will be able to create and follow a budget that satisfies your financial needs.

In this article, I will walk you through 6 great benefits of budgeting your money. Without further ado, let’s get started.

1. A bubget helps you prepare for emergencies

A budget is nothing other than a blueprint that helps you understand your finance, but also, prepares you for what is yet to come. One thing that happens in our lives is that we cannot predict emergencies or decide when they happen. They just happen.

The only thing you can do is get ready for them. How do you get ready for emergencies?

One of many actions to take is to save for an emergency fund. An emergency fund is budgeted money designed to help you cover unexpected expenses. The best way to save for an emergency fund is through budgeting. That is your budget is a great tool to help you save for an emergency fund. Your budget will help you calculate how much you can safely put aside until your emergency fund is fully built.

Without a budget, it will be difficult to properly allocate funds in your emergency fund. Your budget should be your friend.

2. Benefits of budgeting your money: A budget prevents you from spending more than you make

There is only one way to balance what you make and how to spend it. Most people spend more than they make. According to GoBankingRates, 69% of Americans had less than $1,000 saved in 2019.

Most people have nothing saved not because they don’t make enough. Instead, they don’t know how to keep what they make. The environment and living conditions around them do not allow them to save anything. The money they make is spent before they receive it.

The only way to understand what is made and how to properly spend it is through budgeting. A budget will help you maximize your savings for every paycheck you make.

Everyone talks about saving but a few people know proper ways to save. Although there is no formula to save, there are important steps that should not be ignored or skipped. Saving is not just putting $100 in a jar every month.

Saving money goes beyond putting a percentage of your income away. Proper saving techniques involve understanding exactly how much you are making and how to properly allocate it. For example, before you put money away, you have to make sure that important expenses are covered. More importantly, there is no way you can know this information without a well-designed budget.

There are times you will need to reduce your expenses in order to save more money. A good example you can relate to is when you are planning to save for a major purchase such as a house, car, or a wedding. The budget will show you where you are spending more money than you are supposed to and where to cut without negatively affecting your life.

Related: 13 Benefits of saving money

4. The budget helps you eliminate unneccesary expenses

The majority of people are broke and have no savings not because they don’t make enough money. Instead, they don’t know how to keep what they make. People make money and yet, have no idea where it goes.

How do they lose their money? The answer is simple. Flashy things show up, they buy them. Beautiful looking clothes, latest electronics, fancy everything, they buy.

Then comes debt issues. People buy the latest cars. They buy houses they cannot afford to pay off and overspend on their credit cards. At the end of the day, there is nothing left.

The only way to make financial plans is to understand how much you make and where it is spent. Trying to manage your money without a budget is like walking a marathon without a clear path or knowing where your destination will be.

So, your budget is the only thing that will help you prioritize your expenses and make cuts when you have to. For example, if you want to save for a down payment on your house, you can choose to eliminate all or some of your entertainment subscriptions. This is because you can rule them out as nonessential expenses compare to other expenses you have in your budget.

5. Benefits of budgeting your money: A budget helps you plan for retirement

You are strong and rocking it. Ever thought about retirement? The hard truth is that one day you will not be able to show up to work regularly. Your physical and mental strengths will gradually diminish. As a result, you will not be able to do the things you used to do.

You will no longer have the strength to work. In addition, your body will become more fragile. For this reason, your medical bill will go higher as your body falls apart.

You will stop working but your expenses will remain in effect. You will still pay for living expenses, food, entertainment, etc. How are you going to afford all these expenses without working?

The answer will lie in what you have saved for your retirement. Whatever amount you have, you will also have to budget it in a way that you don’t run out of it. You don’t want to live longer than the money you have.

Your budget will help you plan every dollar you have saved and come up with a monthly value that you can take out of your savings without running out of money.

If there is something important you will need in your retirement is a budget. You must also respect everything you have put in your budget. Otherwise, your budget will be useless if you cannot respect and follow it.

6. Benefits of budgeting your money: A budget leads to a happy life

There is nothing better and satisfying in life than being financially free. People with budgets tend to be more organized and happier than those without budgets. A budget leads to better and educated financial decisions.

By counting every dollar, you get to have enough savings, have some for an emergency fund, and extra for investments. These are the foundation of wealth building and success in life.