14 Important Reasons Why You Should Budget Your Money

Below is a famous quote by John Maxwell. A quote that highlights the importance of why you should budget your money.

“A budget is telling your money where to go instead of wondering where it went.”.

John Maxwell

Budgeting is important in order to be able to manage well our money. It should be included in our daily routine and to be given of high importance. If you do not have a budget plan yet, give me a small portion of your time and I will give you reasons why you should budget.

What is Budget Plan

Budget planning or budgeting is a process of planning and forecasting of your money by leveling your expenses and income. Your expenses should not be greater than your income or else you will encounter future financial problems.

For you to save time, below are the reasons why you should budget. But if you want to know and understand it well, just continue reading until the end.

14 Reasons Why You Should Budget

1. ) Stops You For Overspending
2. ) Helps You To Reach Your Financial Goal
3. ) Puts You In Control
4. ) Helps You To Save Money
5. ) Saves Your Life For Emergencies
6. ) Helps You To Stop Worrying
7. ) Helps You To Be Flexible
8. ) Ensures That You Don’t Spend Money You Don’t Even Have
9. ) Enlightens You On Your Spending Habit
10. ) Helps Your Organize Your Expenses and Savings
11. ) Can Avoid Future Financial Problems
12. ) Grows Your Money
13. ) Free From Debt
14. ) Initiates Conversation

Why Bother To Budget

At the current state of our life, you feel that 24 hours a day is not enough if you do not know how to manage your time wisely. Temptations are everywhere at any time.

Just like in money, you will always feel that your income is not enough. This might be true but when you will have an increase in your salary rate you still feel the same, right? That is because you do not spend your money wisely. Time and money are similar in most cases, you should plan on how to spend it.

Here are the reasons why you should budget your money.

Stops You For Overspending

When you have a certain budgeting method, you have a reference on how much money you should spend on each category – savings, grocery, transportation, bills and many more. By this, you will be able to determine when you need to stop spending already.

As long as you are monitoring, your budget can serve as a warning sign to you. It is like someone is saying to you “Oops, slow down. You are almost at the limit.”.

Helps You To Reach Your Financial Goals

In making your budget plan, you are to going assign how much money you should spend on each category. It can help you to focus and to prioritize more important things. It helps you to track your spending habit and to make sure you are going to achieve your financial goals.

Your goals could be for your retirement fund, to be out of debt, for your children’s education or for starting your own business.

Puts You In Control

When you are in a state of constantly asking yourself where your money went and why you are always short of money, then having a budget plan is definitely the answer. Budgeting puts you in control of your money.

You should be controlling your money where to go not the other way around. If you do not have a budget plan, money will dictate you where it will go.

Just like in your job. Let say that money represents the people under you. You should assign, monitor and give instructions and directions to your people for them to really do their duties. If you are not doing this, you are going to lose your job.

Just like money, you need a strategy or an outline of how it should work. If you will not, just like the people under you, it will do what they want and will go anywhere. At the end of the day, you will be wondering where your money went.

Helps You To Save Money

Given that you and your best friend have the same income each month, who do you think will have more savings? Is it you or your friend? Will you agree if I say that, it will be you? That is if you have a budget plan.

People who do not have a budget tend to have lesser savings or worst no savings at all. Budgeting helps you to assign where your money should go.

Let’s go back to you and your best friend. After giving some advice, both of you now have a budget plan but she gave more priority on savings compared to you. She assigned 20 percent of her income to savings while you only allocated 10 percent. As long as your best friend sticks to her budget plan, he or she will have more savings than you.

Saves Your Life For Emergencies

There is no assurance of what will happen tomorrow. Emergency situations occur without warnings. But luckily, there is always a solution or better yet a prevention – emergency fund. Unexpected events in life, mostly bad things only, can make your life miserable if you are not prepared.

Situations like job loss, accident, or death of a family member can really affect you financially. If you were not able to save money, there is a big chance that you will resort into applying for loans or another way of borrowing money.

Helps You To Stop Worrying

As I have mentioned before, in making a budget plan you are going to set how much money you should allot in each category. As long as you take into consideration all of your expenses in making your category, you will be at peace. Because all of your monthly expenses are already covered.

When the time will come that you need to pay your bills, you will no longer be troubled on how you should pay. Since you already set aside a certain percentage from your income.

Let’s say, you already saving a fixed amount intended for your children’s education for a while. When your child starts going to school, you will be at ease since you were able to save enough for your child’s education.

There are more situations wherein budgeting can help you to have lesser worries in life. As long as you stop spending money when there is no more available. Lesser worries, better life.

Helps You To Be Flexible

There are certain instances that you cannot follow through your budget plan no matter how diligently you do it. It is due to unforeseen situations that are beyond your control that comes into your life.

One of these may be due to job loss due to retrenchment. Due to this, your monthly income will be affected. You should make some adjustments in order to cope up. Adjust your set of standard of living until you will able to find a new job. You need also to adjust your budget plan. If you can, reduce more your expenses.

Ensures That You Don’t Spend Money You Don’t Even Have

You might be wondering how can you spend your money if you do not even have it yet? This is through using credit cards. You can go on shopping without bringing cash and you can even shop online. See? How easy and convenient to spend money nowadays EVEN if you do not have it yet.

When you have a budget, you are only taking into account your possible income. You only focused on what you have. You will know how much you earn, how much you need to save, and how much you can afford to spend each month.

Enlightens You On Your Spending Habit

Since you are tracking your expenses, you will be aware of how you are spending your money. You can trace where most of your money went.

How much you spent in buying new clothes and shoes? How often are you eating in a fancy restaurant? About watching movies outside? You can start minimizing spending your money to wants and add it to your savings. Later on, you will notice that you can really save a lot.

You will notice that most of your money does not really go to “needs” but mostly to “wants”. Eliminate those expenses and focus more on saving to achieve your financial freedom.

Helps Your Organize Your Expenses and Savings

By allocating your income into different categories – expenses, savings, and investments, your budget makes you wary of which category takes a lot of portion of your income.

 As you continuously making it a habit to have a budget, you really can make necessary adjustments. Your budget plan does not necessarily to be fixed. There are times where you can spend less compared to the previous month.

If you are planning to have a family vacation next month, then your expenses will be greater compared this month. Your budget plan cannot be the same for each month in the whole year.

Can Avoid Future Financial Problems

As you are on the process of making your budget, you can easily foresee if your expenses are already greater than your income. You can immediately make some adjustments to your expenditures to avoid being short of money. You can avoid yourself from being trapped to debt.

Grows Your Money

Putting your extra cash into a savings account is better compared to putting it in a vault. Your money will grow through the interest that will accumulate.

When you already have enough savings, you can even use it as a start-up to increase your income. You can start investing in mutual funds or in the stock market. It is even possible to run your own business. Just take caution when investing.

Another thing is when budgeting you can avoid penalties and additional interest in paying your bills or loans. Your money will grow by eliminating those unnecessary expenditures.

Free From Debt

The budget plan ensures you that you will always have enough money as long as you follow your own guideline and does not exceed the limit. This helps you lessen the chance of having debt.

Initiates Conversation

When you are not married yet, you are in control of your budget plan. It solely depends on yourself and you can immediately make adjustments without consulting to others.

 However, if you already have your own family it will not be the same. You need to include your spouse even your children and agree on how much you should set to each category. Your spouse may even have a different set of priorities than you. You need to discuss among yourselves and to arrive into one common goal.

Summing It Up

In general, one of the best reasons why you need to budget is to always have enough money. To be able to make every peso counts and serves its purpose accordingly.

You can determine in advance whether you will have enough money to do the things that you want to do or to have. Budgeting is really necessary to have financial freedom. Above are some of the reasons why you should budget. How about you? What are your reasons why are you budgeting?