As a money coach, one topic that we do talk about quite often is the importance of having a budget, so in this post. I will give you the top three reasons why it is so essential to, in fact, have a budget.
Your budget serves two distinct purposes. One, it’s going to be a guide to help you determine where your money needs to go as you earn it, and then secondly, as you start to spend your money, your budget will give you the ability to track your actual expenses, and then you can compare it to your budget.
Insight Into Spending Habits
I have so many clients who are quite surprised at how much money they are spending on restaurants, fast food, monthly subscription services, and the list goes on and on. Ideally, by tracking your expenses, you can then start to look at where you can cut back in your monthly budget. Furthermore, as you begin to track your expenses, you will hopefully make better decisions on how you spend your money.
Guide Or Roadmap For Financial Goals
Whether you are looking to pay down credit card debt or save up for a down payment to purchase your first home, or if you’re trying to plan and save for retirement, your budget will help you work towards these financial goals. I find that my clients and my students who do not have a budget aren’t working towards any financial goals, so in the long run, that’s going to be detrimental to them being able to achieve that financial security that most of us are looking for.
Plan Ahead For Emergencies
When I think of emergencies, I think of a flat tire, car insurance adoptable after getting a car accident, a house repair, or car repair. The list can go on and on. You don’t know when things will happen, but likely they will occur in the future, so you should be planning ahead and actively saving to help you cover these expenses in the future. It would help if you were working on building an emergency fund, and that should be built into your monthly budget.
Now, if you are reading this and you do not have a budget, I want to encourage you to start one ASAP. The sooner you start putting together a budget, the sooner you can start working towards your financial goals. While your budget may not paint a pretty picture, once you do have it down in black and white, you can start putting together a game plan to change your financial circumstances.
The app that I use to manage my budget and finances is called YNAB, which stands for You Need a Budget. If you are interested in checking out this app, here is a link so you can try it out for free for 34 days. Keep in mind that this will be an affiliate link, so I will get a commission if you do sign up for this service.