If you’ve ever wondered…What is budgeting? Why is budgeting important? What does it take to manage my money so it feels like I actually have money to spend?
Well, if you’ve ever made it to the end of the month just to find out your money hasn’t made it this far, it can be frustrating. I’ve been there too.
You’re left wondering where it went. And how you could possibly find yourself in this situation…again.
That’s one of the many reasons you could use a budget.
Let’s be honest: this adulting stuff can be tough. You’re supposed to manage everything yourself, including your money.
But if you weren’t taught how, then how are you supposed to know what to do? Well if you’re asking yourself, “why is budgeting important?” then let’s keep going.
But why is budgeting important?
Managing money can seem hard but it really doesn’t have to be. It starts with a budget. A budget is basically understanding how much money you make, and not spending more than that. Here are 7 reasons why budgeting is important.
1. A budget helps you figure out how much you’re making
Do you know how much you bring home each month? What about each year? I don’t mean your total salary – I mean how much you come home with after taxes, benefits and retirement savings.
Well the first part of budgeting is tracking what you earn. This is an important step in managing your money well.
2. A budget helps you understand where your money is going
And why is this important? So you know how to adjust your spending to avoid debt, save money and live your best life.
Here’s how: when you follow a budget, you track your spending. You can easily see if your spending aligns with your values. You can make sure you’re not spending too much. Instead, you’re spending your hard-earned money on the right things.
Tracking your spending can be as simple as using an excel spreadsheet, writing down and adding up your receipts each month, or using a budgeting app or software.
Here are some great free budgeting apps to check out.
Real quick – are you here because you’re stressed, overwhelmed and motivated to change your financial situation? Working with a financial coach can help you crush your money goals fast! Find out more here.
3. A budget helps you gain control over your money
Budgeting is an important tool that can help you feel good about your finances. It will help you feel in control, when used properly.
If you know how much you’re making, you track how much you’re spending, and you’re spending less than you make – then celebrate! You can feel like your money is working for you – instead of against you.
And that feels good!
4. A budget can help you get out of debt
If you’re in debt, a budget can help you get out of debt. How? Well you spend less than you make and put the excess towards debt.
I know this is simple in theory and a lot harder to do in real life.
But let’s say you make $2,000 per month. And you spend $1,600 per month on bills, food and entertainment. Instead of mindlessly spending the $400 on extra stuff in your life, you can put it towards debt. You’ll get out of debt faster than if you were just paying minimum payments.
Here’s a great debt-payoff video for you if your goal of budgeting is to pay off debt.
This book goes into more detail about paying off your debt. (It was huge in turning my financial future around years ago!)
5. A budget helps you to set financial goals
Budgets help you achieve the life you want to live. Setting money goals, through budgeting, will help you get there.
Tired of living paycheck-to-paycheck? Well create an emergency fund so you have a back-up when you need to pay for something unexpected.
Another financial goal could be to save up for a vacation. This can all be done through budgeting. When you create a budget, you’re creating a plan for your money. You tell it where you want it to go and then spend accordingly.
6. A budget helps you to reduce stress
Can you imagine a life where you’re not even thinking about money? Me neither. Actually 30% of Americans are ‘constantly’ stressed about money – yikes.
But I will say that not being stressed out by money, through effective budgeting and money management is totally possible. Following a budget and making smart money choices absolutely will remove (or at least reduce) that stress in your life.
7. A budget can teach you what life is really about
Sounds cheesy, I know. But hear me out. I’ve been budgeting for over 15 years. That’s tracking my income and my spending on a monthly basis, setting financial goals and definitely making mistakes along the way.
But over all that time, I’ve been able to identify what I really want to be spending my money, time and energy on. And it’s helped me to prioritize my spending, my schedule, and my life. Viola!
((Oh, and if you want to check out what I prioritize about 10% of my income to each year, read more here.))
Why is budgeting important? A recap
Budgeting is having a plan for your money. Your money is a tool and you get to use it to improve your life. To live how you want.
It takes some work to create – and stick to – a budget. There’s not one method that works for everyone so it’s important to keep at budgeting until you find a solution that works best for you.
Once you get a system down for tracking your money and spending according to your priorities, your whole outlook on money will change. You’ll probably have more left over at the end of the month. And isn’t that the goal?