Budget, shmudget. Who needs one?
You! (We’re just guessing.)
If you run out of money at the end of the month, struggle reaching your financial goals or feel remorseful about your spending habits, a budget may actually be what you need.
Now, we know budgeting isn’t the most thrilling topic. Bringing up the subject tends to elicit more groans than cheers. But focusing on the benefits of budgeting can help you push through all the dreaded numbers and math.
5 Benefits of Budgeting
Before we jump right in, we want to give a disclaimer that budgeting can look very different for different people. Some folks follow a rigid budget while others have a more relaxed approach. Some use an app while others prefer a spreadsheet.
Money management is not one-size-fits-all. There’s a multitude of budgeting methods out there. You also have total freedom to break the mold and create your own budgeting style.
If you’re discouraged by the idea of budgeting before you even start — or if you’ve tried and given up a few times already — try flipping your thinking a bit. Consider what your budget can do for you rather than how it restricts you. Here are a few ways your budget can be beneficial.
1. A Budget Can Get You to Break the Paycheck-to-Paycheck Cycle.
Living paycheck to paycheck is an uncomfortable feeling. One missed check, or unexpected expense, can put you in a precarious financial situation.
Examine your budget to see what unnecessary spending you could cut. When tracking your expenses, keep an eye out for old subscriptions or other recurring costs. Consider a bare-bones budget — one where you only pay for essentials — if your income barely covers your expenses.
If you’re stuck in the paycheck-to-paycheck cycle because all your bills are due at the start of the month, try the half-payment budgeting method. Save half of your upcoming payments in advance so you have to pony up less money when the bills are due.
2. A Budget Can Keep You From Missing Bill Payments.
A big part of budgeting is planning for upcoming expenses — like all your bill payments. Rather than assuming you’ll remember to pay all the bills this month, use a budget calendar to keep track of due dates and payment amounts.
When budgeting for variable expenses (like utilities) before your bill arrives, use the average of your costs over the last few months. You can inflate your estimated expenses to give yourself a little cushion in case the charge is higher than average. Or if the bill fluctuates with the seasons (like a higher electric bill in the winter), review what you spent around the same time last year.
3. A Budget Can Highlight Where You’re Overspending.
Dropping $4 on a latte and $10 for lunch here and there doesn’t seem like a lot, but a bunch of small expenses can really add up. If you’re not keeping tabs on where your money’s going, you may be surprised at how much you’re actually spending.
Tracking your expenses and totaling each budget category gives you a clear picture of your spending habits. When you’re confronted with the numbers, you can see where you are overspending — and make adjustments as desired.
4. A Budget Can Assist You in Saving for the Future.
A major benefit of budgeting: You keep more of your money. Budgeting will uncover what goes to essential expenses and what’s left over to potentially save.
If you have trouble putting money aside for savings, pay yourself first when your paycheck comes in. Transfer cash into a savings account so you won’t spend it on happy hour drinks or when you see a good sale on shoes.
5. A Budget Can Help You Allocate Your Money to What’s Important to You.
When you’re making purchases with a swipe of a card or push of a button, it’s easy to spend all your money without much thought. Creating a budget implements a level of mindfulness when it comes to your hard-earned cash.
If health and wellness are important to you, make a budget that frees up funds for fitness classes and green smoothies. If career advancement is a major focus, earmark money for professional development courses.
Nicole Dow is a senior writer at The Penny Hoarder.