This post contains affiliate links, which means I may receive a small commission, at no cost to you, if you make a purchase through a link. Please read my disclosure for more details(Last Updated On: June 21, 2018)
I love budgeting. I live for budgeting. In fact, I used to get paid as a Budget Analyst where all I did was analyze budgets all day long. In this post, I am going to give you 5 reasons why you need to start a budget today.
What is a budget?
A budget is a financial plan to keep track of all your income (money coming in) and all your expenses (money going out) for a given period of time. I like to set my budget every month, but some people do it every quarter (3 months). Some people only do it annually! And of course, there are a lot of us who do not set a budget at all!
Why do you need a budget?
1. A budget gives you a realistic idea of how you spend your money
This may sound second nature, but a budget helps you to understand exactly how you spend your money. By preparing a budget, you can see exactly how much you spend on each bucket of expenses. Trust me, once you start budgeting, you will be in shock at how much your Starbucks coffees or your Friday nights out end up costing you!
2. A budget helps you to set realistic goals
A budget helps you to set realistic money goals and gives you something to look forward to. For example, if you are saving for a house, a car, or a vacation, your budget will help you work towards achieving that goal! With a budget, you will start thinking more for the long-term, which reduces frivolous short-term spending.
3. A budget prevents you from spending money that you just don’t have
Thanks to our best friend the credit card, it has become so easy to overspend and get into some serious debt. By setting a budget and sticking to it, you can prevent getting into (further) debt. You know exactly how much income you earn per month, and you can adjust your expenses accordingly so that you never end up in the red again!
Related: How To Live Without A Credit Card
4. A budget makes you think twice before you make an impulse purchase
It’s so easy to make purchases without thinking twice. A new pair of shoes? A new handbag? Of course you need it! However, by setting a budget, you will start thinking twice before you make any new purchases.
“Can I really afford to spend $100 on a pair of shoes? My monthly budget says I only have $50 to spend on miscellaneous expenses this month.” A budget encourages you to have this conversation with yourself and to stop yourself from making impulse purchases.
This also works for eliminating bad habits such as: drinking too much alcohol, smoking too much, eating too much fast food/junk food, gambling too much, etc.!
5. A budget allows you to plan for upcoming major expenses and even emergencies
If you know that you will have to make a large payment in the upcoming months, then you can adjust your current month’s budget to save up for that amount. Or, you can reduce the spending in your other monthly budget categories to account for this large expense.
Budgeting is the best tool to help you forecast your future expenses and adjust your current spending accordingly!
But what about an emergency expense that you didn’t plan for? Well, as part of your budget, you can also set aside some money in an emergency fund every month. What I usually do is set aside an amount every month for a specific expense, and then if I don’t end up using that money, I just carry it forward until I actually need that money!
My budgeting story
I started budgeting 7 years ago. In college, I was taking a budgeting course for corporations and then I thought to myself, “Wow, this is pretty handy. I should start using a budget for my personal expenses too!”
Since then, I have updated my budgeting spreadsheets on a daily basis. I keep track of all my expenses to the penny! And this has helped me tremendously with managing my finances.
Thanks to my budget, I was able to achieve the following:
- Graduating after 6 years of college, completely debt free
- Purchasing my first home at 25
- Saving over $11,000 as a foreign student on a low income
- Achieve a net worth of over $750,000 (and yes, I’m still a full-time student)
This article discussed 5 reasons why you should start a budget today. Budgeting will help you to better manage your finances, spend less, and save more money!
Are you convinced yet? I’ve written a guide on how to start a budget. There are only 5 steps to it!
Recommendations for you
- Free Guide to Starting Your Own Blog! - This is a free guide I wrote to help you start your own blog!
- Free Resource Library! - I started this library for subscribers and I will be adding more to it every month. Free downloads for blogging, budgeting, moving abroad, etc.!
- Ebates - Get cash back for shopping online! Get $10 back when you spend your first $25!
- Airbnb - I love Airbnb and it's how I afford to travel so much without breaking the bank! Sign up for $40 off your first trip!