5 Simple Reasons to Start a Budget Today
Updated: Jul 4, 2021
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When I first started making an income I was like others who quickly realized that my money was walking off somewhere every month and I didn't know where it was going. Knowing where your money is going by using a budget can provide a sense of empowerment and help you to achieve your financial goals.
Budgeting is the most overlooked component of personal finance. Most people live their lives without a budget. Personal budget statistics from Gallup show that there are only around 1 in 3 of us who actually use some sort of household budget plan.
Considering that over 62% of Americans carry credit card balances past one month and over 20% have student loan debt. You would think that keeping track of your money would be on everyones priority list.
Here are 5 reasons why starting a budget today will massively help you take back control of your life.
Reason #1: Starting a budget provides direction
All of us know exactly how much money is coming into our bank accounts each month and we all have goals that we want to reach. Only looking at one side of the equation tells us only half the story. Budgets give you a big picture view of your finances and helps you to set your priorities when it comes to spending.
Reason #2: Budgeting educates
Money is a tool that we use to achieve the things that are important. Once you can start looking at money as a means to get you where you need to be in life, you start to look at your spending decisions differently.
Reason #3: Waste is revealed
Many of us have "anyway expenses." These are the things that we pay for day-to-day (cup of coffee) that are small amounts and we don't even think about it. You tell yourself that you would have spent the money "anyway." Budgets will help you to identify these budget busters and eliminate them. No matter how small, they add up.
Reason #4: Creates new habits
Following a budget allows you to focus on your priorities and work to accomplish your goals. These could be as small as paying down a credit card debt or creating an emergency savings. Or it could be large goals like a wedding, buying a car, or a home.
Reason #5: Reduces Stress
Who doesn't need less stress? There is nothing like the feeling of true freedom from debt and getting away from that paycheck to paycheck life. Budgeting will empower you because you are taking back control of your life and opening yourself up to other choices with money.
A common method for budgeting I use is the 50-30-20 rule. This means you spend 50% of your income on needs (housing, food), 30% on wants (entertainment, subscriptions), and 20% on savings and/or debts. This rule helps me figure out what I can and cannot afford each month by prioritizing where my money goes. This has also prioritized saving for my future and paying down my current debt.
There is a freedom you can gain in knowing your money is accounted for. For more help with budgeting you can use this simple and elegant budget planning book. You can also contact me and I can walk you through some strategies that fit your lifestyle.