The 17 Best Reasons For Preparing a Budget [2018 Update]
Managing bills and expenses isn’t exactly the easiest thing in the entire world. That said, it's really not the most difficult think either. It's just that growing up the vast majority of us weren't taught the reasons for preparing a budget and tracking your spending.
Without the basics of personal finance to prepare them, millions of individuals and family are left without much guidance on the best practices of how to manage bill payments, debts, and budgets.
So why don't more people try to learn?
Because Budgeting Is Hard
Scrutinizing your finances at the detail required to create a budget isn't easy. It can be extremely overwhelming, which makes it easy to put off. The result is that too many people ignore budgeting today, finding it confusing, time-consuming, and even boring.
I'm not going to argue that 🙂 Budgeting by itself isn't the most exciting thing. But the the opportunities is opens are transformative to your life.
Simply stated: Preparing a monthly budget is by far the most effective way to manage your money.
Preparing a budget can clearly show you how to allocate your money, presenting you with choices that you never realized you had. It will save you the grief of overspending and immersing yourself in debt with and leaving you with bad credit to boot.
So without any further ado...here's the list!
17. Because You’ve Tried Not Preparing A Budget
You already know what happens when you don't create a monthly budget or you wouldn't be looking on the internet for advice on how to do it 🙂 What's the harm in trying to create one?
Kidding aside, a lot of folk resist because it requires someone being honest with themselves when it comes to the matters of money. When you write your spending habits down on paper, you expose a TON of bad habits. That can make some folks wary of trying it. Good thing you're not like other folk.
See Also: How To Make A Budget That Works
16. Focus! Focus!
With budgeting, you won’t fall prey to short-term unnecessary costs that temporarily pique your interest. You avoid spending on items that don’t contribute to your big picture financial goals, like buying a car, house, paying off your student loan, or making financial investments.
With a budget, it’s easier to really work towards these necessary and wise monetary investments.
15. Hey Honey, When Did We Sign Up For This?
Have you ever looked at your bank statement and said to yourself "When did we sign up for this membership to the jelly of the month club? I don't even like jelly!"
With a budget, you essentially are doing a personal audit every month to reconcile all your expenses , so no more sneaky subscription bills getting by.
14. No More Feeling Guilty About Spending Money
Budget don't tell you to not spend money. They give you guidance around how much money you have to spend so that you can be more intentional in buying what you really want. Just make sure you keep a tab on the % of money to the categories that matter to you. For shoes and clothing, a good personal finance rule of thumb is around 3% of your monthly spending.
So go ahead and buy those new shoes, but just make sure you have enough in your clothing budget first!
13. Puts You In The Driver Seat
Sometimes, we may feel like a victim of our money and bills, caught up in a never-ending payment cycle. With a budget, you can be intentional about the way you save and spend your money. It gives you the insight and control to start paying yourself first.
Managing your money properly saves you the stress of suddenly having to adjust to a lack of funds or prepare for an emergency expense. You can decide what you’re willing to sacrifice in the short-term for the long-term.
It is said that with budgeting, you control your money; your money doesn’t control you.
12. Huge Sense of Accomplishment
Budgeting is not easy to stick with. It takes a lot of dedication.
According to a Gallup poll, only 1 in 3 American's create a monthly budget. Now compare that against a recent MarketWatch survey that found over 50% of American's live paycheck to paycheck. You can infer from those statistics, that while the majority of Americans are broke, only a small percentage take the next step every month to create a budget to help them change their situation.
This is why you should be extremely proud of yourself for seeing it through month after month. Budgeting is usually the first step in changing your finances and the success you have becomes a compounding effect into other areas, like paying down debt or investing.
11. No More Overthinking!
How much mental energy do you invest thinking about what you can and can't buy? When you create a monthly budget plan, you front load all of that analysis to the beginning of the month, and then you go on auto pilot, executing that plan throughout the month. Goodbye juggling bill payments!
You can also kick it up a notch by using a budgeting technique referred to as the envelope system. In a nutshell, this is where you withdraw cash once a month to cover all your budget categories, and use envelopes labeled by budget category to manage your expenses. If you don't have money in the envelope for it, you can't buy it.
10. Budgeting Makes You Acutely Aware Your Spending Habits
If you want to improve your personal finances, you're going to have to get up close and personal with how you are spending your money. You need to understand the different types of debt you have, how much you owe, and what they are costing you every month in interest and fees. Budgets put all of that on display, in black and white, every month.
See Also: The TMPF Guide To Debt
9. Gets You Out Of Debt WAY, WAY Faster
A proper budget enables you to aggressively cut expenses, which means you are going to have a lot more money to apply to your debt pay-down strategy. Don't limp along making minimum payments for years. Get in the fast lane!
See Also: The Debt Snowball Strategy
8. More Savings = More Money
The more you save, the more you have to pay down debt. Then once a debt is paid off, you increase your monthly cash flow by essentially putting the monthly payment you used to make, right back in your pocket! Those are both pretty good reason right there.
7. Save and Invest More!
Guess what you can do with more money? You can take that money and begin investing in yourself and your future. This could mean you throw more money into your emergency fund, start ramping up your retirement, save for a vacation, or even start your investing for your non-retirement goals. Who knows, maybe you find yourself in the favorable position where you can even retire early.
6. Reduced Stress
A recent report from the American Psychological Association, found that over 62% of Americans report being stressed about money. Life is way to short for that many people to be that stressed.
5. Increased Sleep
According to the National Sleep Foundation, money stress has a huge impact on the quality and amount of sleep people get. I'm a huge fan of sleep, and with a little kid in the house, I've personally got enough things infringing on my ability to get a good nights sleep.
4. Better Mental Health, and More Energy
Debt is tied so closely to personal and mental heath that the emotional effects of being underwater are known to induce fear, and bring upon depression and anxiety disorders. If you are feeling any of these things, please talk with someone. Sharing your feelings with others can have a cathartic effect and relieve some of the emotional pressure you feel.
And last but not least...the top 3 reasons for preparing a budget are...
3. The Family That Saves Together Plays Together
Budgeting and savings is a fantastic way to bring families together around a common goal. It gives them a sense of responsibility, and helps reinforce positive behaviors that will benefit them throughout their entire lives. Tell the kids they can go to Disney next year if they help the family budget for it. It gets them engaged and invested so they have a reason to help and contribute.
2. Happy Marriage
No one likes arguing about money. Especially when it's with the person you share your life with. According the marriage.com, financial stress is the #2 cause of divorce.
Knowing that, how can you not doing everything in your power to reduce the opportunities for money fights?
1. Improve Your Overall Quality Of Life
Imagine a life with more money, less stress, more sleep, less arguments, more savings, less guilt, and more positive relationships. Sounds pretty amazing right?
Why shouldn't that be your life?
We all want to retire one day, and be able to step away from the stress and demands of the work cycle. That doesn't come with out intentional planning. With budgeting, you have to divide your money into categories of expenditures, savings and retirement investing, forcing you to be more aware of which category is taking more of your money, so
At the end of the day, If you don’t like what you see, you decide where the money goes, and more importantly, where it doesn't. While budgeting isn't an end-all be-all for your financial woes, it gives you a ton of leverage.
What are some other good reasons for a budget? Leave a comment below!