Robie writes to help people acquire financial strength. She got her MBA from the University of Venice, Italy.
What Are the Benefits of Budgeting?
The advantages of budgeting far outweigh the time and effort put into it. A budget helps eliminate unnecessary expenses and hidden fees. Getting your saving and spending organized can really make your extra money work for you. A budget . . .
- gives you knowledge. You start your personal budget by taking a good look at your income sources, bills, expenditures, and debts. Just by going through all your financial information and writing it down in an organized manner, you gain a deep understanding of how your money flows in and out every month. This knowledge provides you with the power to recognize the things that are not working for you and gives you the ability to change them.
- puts you in control. A budget enables you to take charge of your finances and your money. Note that the focus is to help you control your finances—not the other way around. You should not let your budget control you. In fact, any financial plan should be kept flexible so that you are able to adapt in case of family emergencies, medical needs, or other unexpected expenses.
- is a communication tool. Each person has a very unique set of values and priorities regarding how to handle money. If you budget with a partner, chances are the two of you have different ideas of what expenses are necessary and how much should be saved and spent every month. A budget is a great communication tool that helps you discuss your different philosophies on how to handle your finances and provides a firm point of reference for both of you.
Why Should You Budget?
The main purpose of budgeting is to achieve a clearer vision of your finances so you can begin to plan your spending and saving and take control of your money. You are establishing the tools that will allow you to get a better handle on how your wealth is used, and eventually, you'll be able to save enough to cover both known and unknown expenses.
Setting up and maintaining a personal budget may seem like a lot of work, but it is not as complicated and as laborious as it may appear. It does require some time and dedication, but it is truly well worth it.
How to Get Started Budgeting
Start by going through all your bills and expenses and organizing them into categories. Just by doing this, you'll gain a deeper understanding of your assets and spending habits.
Next, sit down and decide what your financial goals are. Where would you like to be financially in one, three, or five years? What kind of purchases or vacations are you saving for?
After you complete the setting your financial goals phase, you’ll have a clearer vision of what your priorities are. With this newly acquired knowledge about your finances, you can look at how you handle your money and identify opportunities to act and make the changes needed in order to reach your financial goals and the desired results.
A Budget Is a Tool to Maximize Your Wealth
A budget is a tool that allows you to organize and analyze your money and to make the best financial and spending decisions. The main reason for budgeting is the desire to maximize your wealth by making smart and efficient use of your money. This will allow you to plan a strategy to take care of your fixed and variable expenses and to be able to save money upfront for expenses that you know are coming later.
This requires planning. Only with a good amount of financial planning you can ensure that you’ll be able to make the choices that will get you closer to acquiring your financial goals and reaching financial security.
Budgeting is key to financial planning and achieving maximum wealth. It provides you with a detailed picture of how much money comes in every month, how much is already committed to fixed expenses, and how much is available for miscellaneous and variable purchases. A budget provides a clear view of your financial situation, a necessary tool for efficient planning of your savings and expenses.
Take a Simple Approach to Personal Budgeting
Having a clear outlook on your money will allow you to make better financial decisions and take actions that will bring consistent and positive results. A budget does not have to be complicated or take a lot of your time.
The biggest time investment is needed when you first start tracking all your expenses.
The secret to keeping the budget simple is to create broad expense categories without going into too much detail. You can list groceries as a category, for instance, but there is no need to have a category for each supermarket or store you shop at. A good budget could have as few as 10 to 15 items yet give you a great picture of your state of affairs.
You can write it on paper, set up a simple Excel spreadsheet, or use a commercial budgeting software. Any way you feel comfortable doing it will be fine so long as you keep your personal budget simple and complete.
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Rich or Poor, You Need a Budget
A personal budget is not important only for people in financial trouble and those having a hard time making ends meet. Anyone can benefit from financial planning. If you are already doing fine with your money without budgeting, imagine what you could achieve if you took the time to plan accurately and use your money efficiently to reach all your goals.
Whether you are rich or poor, having a good knowledge of your financial situation and taking the time to prioritize the goals you want to achieve in the short, medium, and long term can benefit your life in remarkable ways.
Think about companies—businesses all around the world keep budgets and monitor them as a daily task. Budgeting for a business is a necessity even if they are not running in the red. In fact, it is even more important when things are going well to make sure that they are investing properly and making the money work efficiently.
Being able to sleep peacefully at night knowing that there is no need to worry about money and reaching your goals in terms of savings, purchases, and dream vacations will give you happiness and serenity that will only bring more great things into your life.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
Questions & Answers
Question: What's the point of budgeting if my paycheck is just enough for the basics?
Answer: Investing some time creating a budget provides you with a clear view of the money that money flow: what comes in and where does it go? Even when your income it's just enough to cover the basics, it's very important that you are in control and agree with how every cent is spent. Then ask yourself the critical question: are those that I consider basics truly necessary?
Being confident in your spending decisions sets the foundations for a healthy financial life. A budget can help you reach that confidence.
© 2012 Robie Benve
Dividend Driven on February 10, 2018:
Budgeting is important, ongoing and required in order to become financially free. Daily I update my budget with expenses and investment income. My Budget is the tracking tool I cannot do without. It helps me in many ways but primarily to forecast expenses and income so I don’t have any surprises. It also allows me to reflect year over year and see which categories I can cut back on and save and invest even more.Add Your Comment...
Jason Mackenzie from Perth WA 6000 on March 05, 2017:
Agreeing with everything that you have discussed here, especially the point that your level of income is not an excuse to avoid budgeting. Whether you are rich or poor, having a budget is a must - I totally agree with this.
Robie Benve (author) from Ohio on April 17, 2012:
habee, thanks for stopping by and commenting. Best wishes and happy saving! :)
Holle Abee from Georgia on April 17, 2012:
Robbie, I so need these tips! When it comes to spending on the grands, my budget is out the window. lol. Voted up!
Robie Benve (author) from Ohio on April 16, 2012:
yeah, what's better than being in control? Such a powerful and reassuring feeling. Thanks for your comment and support! :)
Robie Benve (author) from Ohio on April 16, 2012:
Cliff, unforeseen things happen, and some a very good things. Too bad that many of them affect our budget. Sometimes we have to seize the moment, and sometimes we have to make compromises, but there is a solution to everything. :) If you have to sit down and plan for a mending budget, keep the smile on and stay positive, a positive attitude makes everything easier.
Thanks for reading and supporting! :)
Marcy Goodfleisch from Planet Earth on April 16, 2012:
You are so right; having a budget puts us in control rather than having our spending control our lives. Very great points here! Voted up, useful and interesting!
Cliff Mendrez from Philippines on April 16, 2012:
Great hub, Robie. Just two days ago, I went on a trip that was out of my plans. My budget has been affected a lot. This hub is a good reminder that planning is key when making a personal budget. Up and sharing!