Budgeting is that the most elementary and basic tool for managing your money. Still, a vast majority of people avoid having a budget because it’s “extra work”. Often time people believe that budgeting also dictates that you are no longer allowed to have fun and enjoy things. Let The Savvy Couple tell you this is completely false, honestly, it does the exact opposite.
What budgeting truly accomplishes is it clearly shows you how to allocate your money. It provides you with a detailed understanding on what you can afford to spend your money on and knowing your financial limitations. Budgeting will save you the grief of overspending and be in an excessive amount of in debt, something millions of American’s struggle with.
Budgeting doesn’t stop you from enjoying things that give you pleasure in life! It allows you to understand your finances better, which allows you to better plan ahead and spend appropriately.
Budgeting can be very simple and provides several life-enhancing benefits:
The Benefits of Budgeting:
1) Provides you control over your money
Control your money, don’t let it control you! A budget is a savvy way of intentionally controlling your money. Budgeting allows you to live with much less stress without having to worry about those unexpected expenses that come up (way too often I might add). It also allows you to understand where your spending is coming from. That daily cup of coffee can really add up over time. Budgeting will help you decide if giving up that cup of coffee every morning would be worth saving for that next vacation instead. Businesses don’t run their company without a budget why should we not stay accountable as well.
2) Let’s you track your financial goals
Budgeting will help you avoid spending on unnecessary fees, services, and products that are cutting into your financial goals. If you have a fixed income budgeting will allow you to make ends meet much easier each month without all the stress. Figure out what your goal is and start working towards it, financial freedom is right around the corner!
3) Makes you aware of what is really happening with your money
Budgeting allows you to know exactly where your money is coming from, where it is being spent, and how much you have at the end of each month. This provides you with a complete understanding of your finances. A budget allows you to understand what you can afford, make the most of buying and investing opportunities and plan for a way to lower your debt. It also shows you what is important to you based on where you spend your money throughout the month. This will allow you to adjust your spending habits in the right direction to reach your goals. – Check out The Simple Dollars post on zero sum budget.
4) Help organize your spending
When starting to budget, start by breaking down all your expenses for the month such as cable, the internet, mortgage, insurance, groceries, entertainment, restaurant, gym membership just to list a few of ours. This makes it easy to understand exactly how much you are spending on your individual services each month. Another reason to break these down into categories it is allows you to see if a bill goes up with a company. Recently our cable bill was raised by $10 a month. Budgeting allowed me to see this change quickly so I was able to call and get our bill back to the original price.
5) Provides a cushion for unexpected costs
A trip to the hospital, car repairs and plumbing problem are all unexpected costs that come up from time to time. It is important that you have money set aside for these types of events. The last thing you would want to do is not have enough money to pay and have to charge it to a credit card that you have a running balance on. We set up an “other” category in our budget just for those types of events.
6) Makes talking about finances much easier
Talking about finances to your parents, girlfriend, boyfriend, or spouse can be a real challenge. Having a budget allows you to have cold hard facts which make it much easier to have a calm conversation. Finances can be a big argument starter, budgeting is one way to reduce the stress about finances. Talk to your significant other and get on the same page. Set aside a “discretionary category” in your budget, this allows for you both to have a limit but also allows you to spend the money the way you want to. (make-up, Amazon, eBay, fantasy football, video games, protein, etc)
7) Let’s you save a “safety net”
When an issue arises in life like unemployment you will be ready. I hope this never happens to you, but budgeting will allow you to be prepared if it does. Having a safety net is designed so that if your income stops coming in you have enough in the bank to keep you on your feet until you find your next job. The saying goes “Have enough in your safety net to last up to six months with no income”. Trust me having a safety net opens up doors! You will never feel trapped again.
8) Pay down your debt
Going to school, taking out a mortgage, and buying a new car are some ways in which people go into debt. Understanding your debt is extremely important! Making sure you understand your interest rates, terms, and length of loans can be critical in controlling your debt. Budgeting will give you a clear understanding of how to pay down your debt. You will find that you can cut in other areas to make extra payments on your debt which will pay off big time in the long run.
Investing is a great way to have your money work for you. Contributing to your retirement is crucial to be able to retire as planned. Some people use the rule of “Whatever is left at the end of the month I will put in my retirement”. This is backward thinking. Know how much you need to contribute and work that into your budget! We use Betterment and Robinhood as our personal investing platforms. I will provide an in-depth review of both those companies in the coming months.
10) Last, but not least it allows you Live Frugal and Free
We have said before that controlling your money will have huge positive impact on your life! We have a passion for budgeting and with Mint.com it
takes us less than 10 minutes per month to check our budget. We swear by MINT and will have an in-depth review on this budgeting platform as well in the near future. The Savvy Couple believes that material things only provide you with a temporary small portion of happiness. You get to enjoy them for a little while, but then they are gone. We are all about experiences and making lifelong memories together! Budgeting enabled us to take control of our finances. Allowing us to travel, make memories, and live free more than we would have ever imagined!
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Questions for you….
Do you have a monthly budget?
What scares you about a budget?
What budgeting software or website do you use?