According to a recent poll made by Gallup, only 30% of Americans prepare a detailed monthly budget, which allows them to track their income and expenses. Gallup is a company that offers advice, analytics and research services to businesses and has been around for 75 years. The result of the poll shows that many people still do not prepare a budget for their homes.
If you’re one of these people who don’t follow a budget, it’s time to change this habit. It’s never too late to start a monthly budget that you could stick to. If you’re not yet convinced, here are some of the top reasons on why it’s important to have a budget.
Ensure that you don’t overspend
Living within your means is important as overspending may lead to financial crisis. Through budgeting, you’ll know how much you can spend on a particular area, like groceries or foods, without going over what you can afford. If you don’t have a budget, you would keep on spending without even knowing if your money would last until the next payday.
Keep track of what you save
Budgeting does not only let you track your expenses, but your savings as well. Even if you set aside a certain percentage of your paycheck each month, it would be difficult to determine if what you save is enough and if you’re maximizing the amount that you can save, without a detailed budget. For instance, by knowing where your money goes, you’ll know if you’re overspending on unnecessary things. You can then make a conscious effort to change your spending habit and save more.
Have something to spend for emergency situations
This is in line with maximizing the amount that you can save by cutting back on unnecessary expenses. Unexpected things could happen anytime like hospitalization or the car breaking down. You’ll have peace of mind knowing that you have something to spend if these things happen.
Help achieve your goals
Wanting to have that gadget for a long time? Or maybe you would like to upgrade your car? It’s difficult to achieve these goals if you don’t have a budget to follow. But if you start creating one, you can make necessary adjustments on your expenses to set aside a specific amount to buy what you want within a specific period. That gadget or new car doesn’t have to be out of reach if you have a budget set.
Free yourself from debts.
As mentioned, overspending can lead to financial troubles. If you spend over your means, you may not have anything left to survive until the next payout. You may not have a choice but to resort to borrowing money either from friends, financial institutions or using your credit card. Either way, you’ll end up getting more debts.
If you continue doing this, you may end up with towering debts that could be difficult for you to pay back. Your credit score would also be affected, which may cause your future loans to be denied. This may also affect job opportunities as many employees now consider a person’s credit history when hiring.
Reduce stress caused by financial matters
Making ends meet can be stressful. But the stress level is even higher if you don’t have a clear idea of where you’re spending goes and how much you still have for the coming days. Would you have enough money to spend until the end of the month if you spend on a specific item?
You don’t have to guess for the answer if you make your budget. Through budgeting, you’ll know what your expenses are and you can set a specific amount to spend for each. You can then easily make adjustments in case you decide to spend more on something. Knowing that everything is covered for the month will reduce stress in managing your finances.
Have a worry free retirement
This is also related to saving enough money and being debt free. If you save enough money and you’re free from debt, you’ll have a worry free retirement. Moreover, if you start saving at an early age, you may even enjoy retiring early, instead of having to work for more years.
Start creating your budget today to rip all the benefits. But remember, the budget that you prepare is meant to be followed or else, it wouldn’t serve its purpose.
1st and featured image courtesy of Stuart Miles / FreeDigitalPhotos.net
2nd image by U.S. Army Corps of Engineers from USA [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons