Budgeting is the first thing mentioned in most financial planning articles. It’s something recommended every time someone asks what they can do to get their finances under control and stop spending so much money. But why is it so important? It turns out, there are quite a few reasons why it’s crucial to have a budget, especially for those who have a lower income.
Keeps Finances Under Control
The reason why budgeting is often top on the list of money management life skills is that it’s a great way to keep finances under control. With a budget, it’s easier to see the money being spent and see if there are areas where too much money is being spent. This makes it easier to make sure the most important bills are paid first, so there is money left over for things that are fun instead of too much money going to things that are fun and not having enough left over to pay the bills.
Shows When Adjustments are Needed
Is too much money being spent on one category, leaving not enough in others? With a budget, it’s easy to see when adjustments are needed. This may mean having less money in fun categories, stretching the current amount of income a little further. It could also mean it’s time to look into other ways to make money to increase the income a little bit so it’s easier to cover everything. The way to know that something needs to be done, though, is to look at the budget and see what needs to be adjusted.
Helps Decide How to Spend Money
The budgeter receives a little bit of a windfall and has some extra money. While some of it might be earmarked for fun activities or other things they enjoy, they may want to be responsible and use some of the money to help their current financial situation. A budget makes it easy to see where that money can go. Maybe it can be used to pay down debt, put aside in case there’s an emergency in the future, or used for current bills to just relax the budget a little bit and get back on track.
Ensures Nothing is Forgotten
When it’s time to pay the bills, it’s all too easy to forget one or two. Or, think they’re paid, but they aren’t. With a budget, it’s easier to keep an eye on all of the bills, ensuring they’re paid on time. This helps to prevent late notices and fees, which can help the budgeter save a significant amount of money over time. It can also help keep the power on and avoid other issues like repossession that can happen if bills are forgotten or get behind.
For those who are trying to get their finances under control, especially those with a lower income, it’s crucial to have a budget. It provides numerous benefits and is a great way to see the big picture of the financial situation and what can be done to improve it.