Since budgeting allows you to create a spending plan for your money, you make sure that you always have enough money for the things that you need and that are important to you. Following a budget or spending plan will also keep you out of debt or help you work your way out of debt if you are currently in debt.
Budgeting is one of the most important financial habits that you can adopt. But if you’ve never lived on a budget, or haven’t experienced all of the benefits budgeting has to offer, it is easy to wonder why this is such an important aspect of personal finance. Why is budgeting important?
In short, budgeting is important because it will help you control your spending, track your expenses, and save more money. Additionally, budgeting can help you make better financial decisions, prepare for emergencies, get out of debt, and focus on your long-term financial goals.
Put simply, living on a budget is a fundamental part of proper financial management.
Still not convinced? Here are 13 great reasons why everyone should budget and stick to it.
In fact, for the rest of this post, I’ll dive much deeper into the importance of budgeting and why it’s such an important part of your financial well-being.
13 Reasons Why Is Budget Important?
1. It Helps You Control Your Spending
Let’s face it, if you’re running your finances without a budget, there’s nothing stopping you from spending beyond your means. Sure, you might have a rough idea of how much money you can spend each month, but without fixed, accurate numbers, it’s easy to lose control of your spending habits.
I would know. Before I started budgeting, we spent money like it wasn’t a big problem. From eating out to trips to the mountains, without a budget, it was difficult to relate our daily expenses to our less than the ideal financial situation.
I mean, sure, buying lunch at a time doesn’t feel like a big deal right now. However, when you sit down on a budget and add up the cost of 30 chipotle burritos per month (yes, I said 30), those seemingly insignificant lunch bills add up to over-the-top expenses.
In other words, budgeting is important if you want to keep a close eye on your daily spending habits, understand the impact of seemingly small expenses, and take control of your spending.
2. It Helps You Keep Your Eye on the Prize
A budget will help you identify and work towards your long-term goals. If you’re just drifting aimlessly through life, throwing your money on every pretty, shiny item that happens to catch your eye, how can you ever save enough money to buy a car, take a trip to Aruba, or make a down payment a house?
A budget forces you to set your goals, save money, track your progress, and make your dreams come true. OK, so it can hurt when you find that that brand new Xbox game or that gorgeous cashmere sweater in the shop window doesn’t fit your budget. But if you remember that you’re saving up for a new house, it’ll be a lot easier to turn around and leave the store empty-handed.
3. It Shed Light on Your Spending
Ever felt like you didn’t know where your money is going? I have. It’s disturbing and frustrating. I knew I had all the money to pay my bills. Why did I feel broke most of the time?
When the end of the month comes and you’re wondering where all of your money has gone, it’s time to create a budget. There are several different budgeting methods that you can use to get a grip on your finances. Some take more work than others, so choose one that suits you and work on a budget.
Once you start budgeting your money, you will know:
- Exactly how much money you made
- How much do you need to cover your bills?
- The amount that you can spend at your own discretion
- How much you can use for your savings and other goals
With all of this information available, you can plan your future, save money, and track your progress.
4. It Can Help Your Marriage
When you are married, your budget is extremely important in keeping you and your spouse on the same footing. It will help you plan your financial future together, hold each other accountable, and ensure that you are fighting on the same team.
I think everyone knows that money struggles are one of the biggest problems in marriage. So if you want to end the financial disputes between you and your spouse and finally get on the same financial side, budgeting is an extremely important first step.
5. It Helps You Find Financial Contentment
Financial satisfaction is one of the basic elements of good financial behavior. It keeps you from spending money you don’t have and helps you enjoy your financial journey.
But here’s the thing, if you spend all of your time focusing on other people’s finances, you will never find satisfaction. You’ve probably heard this is called “keeping up with Jones,” and it’s a bad (and financially dangerous) way to live.
Instead, you need to focus on your own life, your own money, and your own decisions. And that’s why a budget is so important.
Every time you sit down to create, evaluate, refine, or budget expenses, make a conscious effort to focus on your own finances rather than others. After a while, you lose focus on what other people are doing with their money. And at that moment you will experience what it is like to be financially satisfied.
6. It Keeps You From Feeling Financially Overwhelmed
If there is one thing in particular that doesn’t mix well with overwhelm, it’s personal finance.
In fact, I’ve never met anyone who enjoys feeling overwhelmed. I think it’s fair to say that feeling overwhelmed just sucks.
The good news is that one of the best ways to combat financial overload is to live your life on a budget. That way you never spend beyond your means, you are always well prepared for unexpected expenses, and fewer things can pop up and bite you.
7. It Gets You Out and Keeps You Out of Debt
Spending money you don’t have by adding credit to credit card balances is a surefire route to financial ruin.
If you only make the minimum payments, you are wasting way too much money on interest. If you are ever late with your payments, the harsh late fees alone can reset your payout date. If you miss a payment, rest assured that your card issuer will raise your interest rate even higher.
If you don’t keep track of your spending and budgeting, plastic makes it too easy to overspend. You may not even realize how much trouble you are in until the bills show up and you are drowned in a sea of high-interest debt.
If you build and follow your budget you will not end up in this nightmare situation. You will know what you can and cannot afford. You can use your budget to save for your needs instead of running out of your cards and regretting it when the bills arrive.
If you already have debts, a budget will help you get rid of it faster. As you create your budget, look for things that you can change or eliminate. Use the free money for your debts
8. It Helps You Prepare for Emergencies
Life is full of unexpected surprises, some better than others. Getting laid off, sick, injured, divorced, or dying in the family can create serious financial turmoil. Of course, it seems like these emergencies always come at the worst possible time – when you’re already tight on cash. That is exactly why everyone needs an emergency fund.
Your budget should include an emergency fund consisting of at least three to six months of living expenses. This extra money ensures that you do not get into the depths of debt after a life crisis. Of course, it will take time to save up to three to six months on the cost of living.
Don’t try to put the bulk of your paycheck into your emergency fund right away. Build it into your budget, set realistic goals, and start small. Even if you set aside just $ 10-30 each week, your emergency fund will slowly build up.
9. It Helps Lead to a Happier Retirement
Let’s say you spend your money responsibly, stick to your budget, and never run into credit card debt. Good for you! But aren’t you forgetting something? As important as it is to spend your money sensibly today, saving is also important for your future.
A budget can help you with this. It is important to plan investment contributions in your budget. If you put a portion of your income aside each month to contribute to your IRA, 401 (k), or other retirement funds, you will eventually build a nice nest egg.
Even if you may have to sacrifice a little now, it will be worth it on the road. After all, would you rather retire from playing golf and taking trips to the beach or working as a greeter at the local grocery store to make ends meet? Exactly.
10. It Help You Cut Expenses
Once you’ve figured out where all of your money is going, it’s a lot easier to find ways to cut your expenses.
When we finally made up our minds to budget and live and review our earnings, we were shocked by the amounts we were spending on certain things.
We saved $ 115 a month by getting rid of cable television altogether. We paid for hundreds of channels, most of which we never saw. We don’t feel disadvantaged between Netflix and Amazon Prime Video.
We have drastically reduced our food spending. Grocery and takeaway food consumed an alarming percentage of our monthly expenses. As a result, we became more strategic on food spending. Now we mainly buy sale items, use coupons, and do a lot more home cooking.
There were some bad buying habits that we identified and eliminated. Things like bottled snacks and drinks at gas stations, late fees, ATM fees, and lottery tickets.
As you set your budget, you will find things that you spend money on that you don’t need, don’t use, or don’t need anymore. Eliminate them from your budget.
Creating a budget forces you to review your spending and establish better money habits. Perhaps, like us, you find yourself spending too much money on things you don’t need. Save unnecessary expenses and you will free up money to save or for financial goals that are more important to you.
11. It Help You Build a Saving Habit
If you don’t budget, it is difficult to prioritize saving and investing. Without a budget, you could totally overlook putting money aside and zeroing it out every time you get a paycheck. Or, you may think that you will save all that you have left at the end of the month. But the amount you have left at the end of the month varies. In some months there may be nothing left at all.
If you are on a budget, you can make sure that you pay yourself first. You create a budget category for savings and treat it as an invoice. Every time you get paid, you put money into your savings.
It doesn’t matter if you save 10%, 20%, or a fixed dollar amount. It is important that you consistently save part of your income. Budgeting takes care of that.
12. It’s Better Than Counting Sheep
Sticking to a budget will also help you close your eyes. How many nights have you tossed back and forth worrying about how you’d pay the bills? People who lose sleep due to financial problems let their money control them. Take back control. If you plan your money carefully, you will never lose sleep over financial problems again.
13. It Help You Improve Your Overall Quality of Life
Imagine a life where you don’t worry about money, all your bills are paid on time, and when you buy something you buy it with no guilt or worry. You rest calmly each night knowing that you are making progress on your financial goals.
That’s life when you have a roadmap and follow it. Your budget is that roadmap. Of course, this is only the tip of the iceberg. There are myriad other benefits of staying on a budget. So what are you waiting for? Time to start budgeting!