Why? Simple: because budgeting will set you free.
What a Budget Isn’t
A budget isn’t actually that time consuming and it isn’t that difficult. All it requires is a little discipline and some practice. Budgets aren’t just for the very wealthy, the very poor, or those with complicated finances. A budget doesn’t “tell” you what to do with your money or prevent you from having fun.
What a Budget Is
A personal budget doesn’t have to conform to some mystical, universal standard. The right kind of budget is the one that works for you. I do best with very meticulous bookkeeping, but I know others who do best with a more relaxed system based on cash. For example, they give themselves twenty dollars cash a week to go out to eat and when it’s gone, it’s gone; but they don’t worry about recording where they spent that money.
Some people like to keep a small notebook for tracking expenses so they can carry it with them. I like to the use the computer for the ease of sorting, comparing, and tracking categories month to month. The point is that you should do a little research to find a method that makes sense to you and works with your lifestyle.
What Keeping a Budget Means
The most important thing about keeping a budget is what it means to you and your finances in the long term. Keeping a budget means that you have a chance to adjust your spending to get what you want. If your electric bills are appalling, maybe it’s time to insulate or to replace your windows, which may save you money and increase the value of your home. If your restaurant spending is out of control, you can rein it in and put more of that money towards paying down your debt or saving money for a house or car.
Knowing where your money is going may even mean that you discover you have money to invest. Retirement accounts are best started when you’re younger to let interest work its magic. You can put your money into anything from term deposits to stocks, but only if you know it’s available for investment in the first place.
The beauty of budgeting is that it helps us meet our long-term goals: affording a decent car, saving for a deposit on our dream home, paying off our debt, putting our kids through college, or relaxing in a well-funded retirement. Those goals won’t happen by accident and you don’t reach them by just wandering through life without a strategy or plan. A personal budget is a plan. It is your roadmap from Point A to Point B. So, don’t waste time by driving without a map!
This article is by Sabrina Matheson, whose personal finance tips appear on Health Insurance Comparison and many other blogs.