Managing your finances without a budget is like driving a car with your eyes closed. You may reach your goal–if you’re really lucky–but you will likely take a beating, making one wrong turn after another, smashing headfirst into unforeseen obstacles, and forking out a whole lot of money to clean up the mess you create along the way. Yes, following a budget allows you to see exactly where you’re headed and reach your goals with your finances firmly intact.
Still not convinced? Here are some of the ways that devising and adhering to a budget can greatly enhance the quality of your life.
Know Your Starting Line
If you have ever found yourself lost in a large shopping center, you were likely pleased to find a map that boldly says, “You are here.” After all, it’s impossible to chart your course without first knowing your starting point. The same is true when it comes to creating your financial goals and mapping out a course to reach them.
Creating and sticking to a budget will enable you to know exactly where you’re at–how much money is coming in, how much is going out, and where said money is going. As “The Advantages of a Monthly Budget” states, by “establishing all sources of income, including salary, bonuses, and personal items you may have sold during the month, as well as expenses, which includes everything from the house payment to the dollar you fed the parking meter, you have the advantage in determining where your money goes today and how to make it go further tomorrow.” Armed with an accurate picture of the “here and now,” you will be better equipped to map out your next step towards your financial goals.
When planning a journey, it is prudent to identify the obstacles that you will encounter ahead of time. This way you can either change your course or, if these obstacles prove unavoidable, you can better prepare yourself to overcome them.
A well-planned budget will enable you to identify the smoothest route, while readying you to conquer any hurdles that may cross your path. How can a budget do all that? Firstly, your new budget will reveal any ways that you are wasting your money, providing you with the opportunity to rectify them. Are you shocked to learn how much you fork out for Starbucks each week? Thanks to your budget, you will be more aware of your spending and better able to curb it.
Secondly, your budget will afford you a chance to ramp up your savings–creating a cushion of protection in case you encounter an obstacle. According to “6 Real Advantages to Setting Up Your Own Personal Budget,” each time you spend money, you are either adding to or detracting from your overall financial position, and your personal budget will show you the impact of your proposed expenditure in advance. In other words, if buying a new Coach handbag will send you miles off course, your budget will reveal this before you tack on miles to your journey.
Focus on Your Destination
When you are plotting a journey, you need to set your sites on your destination. When it comes to your finances, this destination is your goal–financial security, a comfortable retirement, owning your home free and clear, or being completely devoid of debt. Your budget is the route you have highlighted on your map. In fact, your budget can allow you to chart several goals at once–long-term and more immediate. On your way to a comfortable retirement, for instance, you may wish to go on a family vacation or put your kids through college.
“11 Ways Budgeting Can Improve Your Life” reminds us that as savings becomes a priority, “the family can move towards major goals and that many goals can be set and reached because the budget has been used consistently to monitor the financial activities.” When you veer off-track, you will notice right away and be able to make adjustments. And, as you reach each goal, you will feel motivated to motor on.
Take The Helm
There is nothing worse than feeling a lack of control over a situation. A sense of helplessness. Like a driver stuck in a runaway car. Thankfully, a budget can put you firmly in the driver’s seat with complete control over where you’re headed and when you will get there.
As “10 Benefits of Budgeting Your Money” states, a budget lets you control your money, instead of your money controlling you. Armed with an accurate picture of your fiscal reality, you will be able to make decisions based on fact–not fiction. You will experience lower levels of stress. You will be better equipped to pay down your debts more quickly, save interest charges and late payment fees. You will be able to make purchases knowing exactly how they will impact your bottom line. And, you will become the designer of your own financial destiny.
Yes, creating a doable budget may sound like an onerous task, but not having one can lead to life plagued by financial missteps, lengthy delays in achieving goals, and an inability to ever reach financial freedom. This “Free Budget Template,” can help you get started with an easy-to-use and cost-free budgeting tool.
How has following a budget enabled you to reach your goals?