Is Having A Budget Really That Important?
Last Updated on Thursday, 18 July 2013 03:26 Written by Ebiz Thursday, 3 January 2013 01:07
Having a budget for anything you do financially will help you have control of your financial future while telling you where your money goes, how you spend it, and what direction your money can and will go. A budget helps you plan and understand how to spend your money build a savings account and retirement fund, and use and manage your credit wisely. Here are several reasons why having a budget is important:
*Reaching your goals in life- Whether it’s your goal to travel, buy a vacation home, and retire early or all of the above, having a budget means working out a realistic savings and spending plan that will help you reach your goals.
*Calculating your everyday expenses- Having a budget for your regular expenses helps to put you in control of how you spend your money as well as paying your bills and preparing for unexpected costs. When you are in control of your finances, you will most likely make better decisions on how you spend it.
*Living within your means- Having a budget also means knowing exactly how much your income is. Your post-tax earning may be less than what you think. Unless you take a second job or change jobs, living within your means and keeping your spending in line with what you actually bring home, will help prevent you from accruing unmanageable debt. This in turn will help you keep a good credit rating by not going over your limit with credit cards, car payments, a mortgage, etc.
*Preparing for unexpected costs- We all know what it’s like to have to make an emergency trip to the dentist, pay for a car repair or anything else that may come up as an unplanned and unforeseen emergency cost. Having a budget can help you save for these unexpected situations while preventing the need to take out a cash advance on a credit card or apply for a payday loan to cushion the financial gap.
*Getting and staying out of debt- Budgeting is key to climbing your way out of the debt you have incurred or staying out if you have managed to do so already. When you live within your means and spend in line with your income, your level of debt can fall from making regular payments on time and staying away from spending money you technically don’t have.
*Building your credit and acquiring a good FICO score- Increasing your financial standing can only happen when you make payments on time and in the amount required. When you do that, your dent to income (DTI) will stay low and your credit score will go up giving you purchasing power in the future.
*Reducing your level of stress- Stress about money can affect our ability to sleep, be productive at work, and function in our family and home environment. Almost all of us have experienced financial stress at one time or another. When budgeting puts us in control of our money, we spend less time worry about our finances.
*Staying healthy- While budgeting can relieve stress, it also allows for making provisions to have the proper health insurance for ourselves and our family members. Taking advantage of health benefits means living a healthier lifestyle.
*Seeing that light at the end of the job tunnel- Most of us envision being retired one day and enjoying the reaping the rewards of our hard work. Having a budget includes calculating how much you will need to retire and at what age, and putting that money in a retirement account. Retirement is something we should all look forward to; not dread.