Budgets help us accomplish our financial goals, alleviate stress, and prepare us for the future. Let’s break down why you need a budget.
To many people, budget is practically a bad word. They see it as a prison that keeps them from having fun or buying things that make them happy. But in reality, a budget is freedom. Budgets help us accomplish our financial goals, alleviate stress, and prepare us for the future. We all have spending limits based on our incomes, but a budget is more than a limit. It’s a tool for prioritizing what’s important to you, both now and in the future. Let’s break down why you need a budget and the benefits of managing your finances.
Why You Need a Budget
Let’s start by establishing what a budget actually is. So many people hear the word budget and automatically think it means less eating out or not wandering Target. A budget is actually just a financial plan for a set period of time. That means that you keep track of your income versus expenses in order to accomplish a goal. Establishing a budget is less about setting restrictions and more about creating a map of your future financial goals. If you love using a planner and setting goals, then you may actually enjoy budgeting.
Budgets can be created for an entire year or smaller increments. Let’s say you want to pay off some debt within the next six months. A budget can help you map the amount of money you typically spend each month versus the money you earn. This will show you if your goal is attainable. It will also reveal some expenses that you can cut to help achieve your goal faster. Cutting expenses doesn’t always mean cutting fun, it just means being mindful of your money. And certain budgets don’t have to last forever! Once you reach your goal, then you can set new ones. And new goals mean a different budget.
5 Benefits of Budgeting Your Finances – The Biggest Reasons Why You Need a Budget
A budget isn’t a prison designed to keep you from having fun. A budget is a key to financial freedom. It allows you to really look at your finances. Make a plan and set goals. And then accomplish those goals. If you don’t have financial goals, it’s going to be difficult to pay off debts. Freedom to do those things is why you need a budget.
Since you are in charge of your budget, you set the rules. Want to still eat out most of the week? Do it. Want to make changes to your spending to accomplish your goals faster? You can do that too! Determine if there are expenses that you can cut, like daily Starbucks or streaming services you rarely use. Small expenses add up fast. Just cutting a $10 subscription saves $120 over the course of the year.
My husband and I were able to pay off our student loans and purchase a house by following a strict budget. We ate at home, didn’t make mindless purchases, and monitored our spending closely. Sometimes, it was really difficult. But being free of loan payments and having our own house was worth it!
Save Money for the Things You Really Want
Another reason why you need a budget? In order to buy the stuff you really want! Instead of spending money mindlessly on things you don’t need, a budget helps you save for the things you really want. Simply monitoring your finances and seeing how much money you spend is eye-opening. If you’re tired of pining after items out of your price range, make changes to your everyday spending so you can buy what you want.
The best example of this is me. I love going out to eat and to Starbucks. But when I fill in my budget bi-weekly I’m always surprised at how much those things add up. Then I’m disappointed I can’t buy a new bag or take a trip on a whim because I don’t have the money. I realized that if I cut down on my impulsive food choices, then I could easily afford the things I really wanted. A beautiful new purse is going to bring me more long-term happiness and use than a cup of expensive coffee.
The number one cause of stress in adults: MONEY. We are always worried about having enough money. The funny thing is, many people deal with the stress of not having enough money by impulse shopping. It’s a vicious cycle. While having a budget is not going to fix everyone’s money problems, for some people it certainly helps. A set guide to how you spend your money can help ensure you have enough of it for emergency situations or the future.
Budgeting may also alleviate the stress of constantly monitoring your finances. Set aside a date and time each week, or bi-weekly, to check your budget, update any purchases, and pay bills. By having a set guide and date to budget, you aren’t thinking 24/7 about paying this bill or that.
Create a Healthier Lifestyle
A big benefit to budgeting that I’ve seen in my life is that a budget helps me make healthier choices. Those healthier choices involve not only my physical health but my mental health as well. This may mean focusing on other activities that don’t involve impulse shopping. Or spending less time in front of the TV.
For example, cutting streaming costs. Every few months my husband and I take a look at our reoccurring expenses. Then we decide if those subscriptions are still serving us. If they aren’t, we cut them off. This usually means that I spend less time scrolling through Netflix to find something to watch. I will read a book, journal, or do another relaxing activity instead. I love TV, but constantly having it on and not being engaged is not great for my mental health.
And of course, cutting out super sugary coffees or constant drive-thru meals can help you make better food choices. The more in tune I am with my budget, the less I randomly buy junk food on a whim. And this doesn’t mean restrictive eating or dieting, it just means making conscious decisions about what you spend your money on.
Prepared for the Future
The biggest reason why you need a budget is to prepare for the future. A budget helps you focus on your future short-term and long-term financial goals. For example, on the short-term side, you may want to take a trip somewhere. You decide how much money you need for the trip and start saving accordingly. Then you are saved up and ready for the trip. While you are on said trip, you don’t have to worry about spending because the money is already saved up and ready to go. You just get to relax and enjoy your vacation.
On the long-term side, you may save to pay off debts or make a big purchase like a house. Another long-term financial goal may be to just have money on standby in the event of an emergency. A future financial emergency may include a car repair, appliance replacement, or medical emergency. It may not be possible to have all the money needed for this kind of emergency set aside. But this kind of future saving provides a safety net. It also relieves a bit of the stress of an emergency situation.
We set aside a small amount of money each month for an Emergency Fund. This money is reserved for any financial emergency that may arise. This fund helped us pay for many unexpected home repairs and job uncertainties in the past. While those situations were still very stressful, our emergency fund provided peace of mind. We didn’t worry that we couldn’t afford our typical bills and expenses on top of the stress.
These reasons why you need a budget aren’t about restricting your lifestyle or denying yourself fun. They are about creating the freedom in life to buy the things you truly want. And to give yourself financial peace of mind. Too often we buy, buy, buy, only to wonder where our money went. A budget gives you full control.