Many people spend way more than they earn and slowly sink deeper into debt before they realise it. This is where budgeting comes in.
What Is Budgeting?
Budgeting, simply put, is a plan created for how you spend your money. This allows you to know how much is available to do the things you need or would like to do. It also helps to prioritise your needs according to their importance.
Why You Need A Budget?
1. Achieve set goals and objectives – A budget can help you forecast your expenses and make plans for long term goals like buying an investment, starting your own business, down payment for a house or short term goals like even going on vacation.
2. You spend what you have – Spending without discretion is one area where people have always spent more than they have. Having a set budget and using saved money for this particular need takes care of it. This will definitely keep you out of debt or help you work your way out of debt if you are currently in debt.
3. Makes you happy when you retire – Contributing a part of your money from your budget to investments is very important. This will be seen in later in life.
4. Emergencies – Life happens to everyone and you’ll never know when the unexpected will come. This is why it is crucial to have an emergency fund set aside. It helps you have peace of mind knowing you have funds “just in case”.
5. Control bad spending habits – Having a budget may help you become aware of certain things you are spending too much money on. You’ll start asking the important question of whether something is a necessity or not. This will definitely help you to rethink the way you spend money and re-focus your financial goals and objectives moving forward.