A budget is the most fundamental and most effective financial management tool available to you. Regardless whether you are earning thousands of dollars a year, or hundreds of thousands of dollars a year, it is an extremely important tool used to give you an understanding on how much money you have to spend, and where you are spending it.
Budgeting is about planning. And planning is crucial to produce a desired result. A builder would never start work on a new house without a blueprint. You would not get in a car for a cross-country road trip without a map. The same should also be applied when it comes to your money, yet many of us find ourselves in the situation where we make, spend and invest money without a plan to guide us.
A budget is one way for you to plan, organize and control your financial resources. It can help you set and realize goals, and decide in advance how your money will work for you.
The basic idea behind budgeting is to save money up front for both known and unknown expenses.
Seven Benefits of Budgeting
1. It lets you know what is going on
Personal budgeting allows you to know exactly how much money you have, how your funds are being allocated, how they are working for you, what your plans are for them, and how far along you are toward reaching your goals. Knowing about your money is the first step toward controlling it.
2. Control
A budget is the key to enabling you to take charge of your finances. With a budget, you have the tools to decide exactly what is going to happen to your hard-earned money - and when. You can be in control of your money, instead of having your money limit what you do.
3. Organization
A budget divides funds into categories of expenditures and savings. It can also provide further organization by automatically providing records of all your monetary transactions. They can provide the foundation for a simple filing system to organize bills, receipts, and financial statements.
4. Communication
If you are married, have a family, or share money with anyone, having a budget that you both (or all) create together is a key to resolving personal differences about money handling. A budget is a communication tool to discuss the priorities for where your money should be spent, as well as enabling all involved parties to "run" the system.
5. Take advantage of opportunities
Knowing the exact state of your personal monetary affairs, and being in control of them allows you to take advantage of opportunities that you might otherwise miss. Have you ever wondered if you could afford something? With a budget, you will never have to wonder again - you will know.
6. Extra time
All your financial transactions are automatically organized when it comes round to the end of the financial year. Being armed with such information saves you time digging through old records.
7. Extra money
This might well be everyone's favourite benefit. A budget will almost certainly produce extra money for you to do with as you wish. Hidden fees and lost interest paid to outsiders can be eliminated. Unnecessary expenditures, once identified, can be stripped out. Savings, even small ones, can be accumulated and made to work for you.
To learn more about managing a budget, speak to a financial advisor from Intellichoice about a savings and debt management strategy to help you achieve your financial goals. Please feel free to use the free budgeting calculator to get started on managing your money.
