Why Budgeting Matters (Even If You Think You're Doing Fine)

 

Why Budgeting Matters

     As a financial counselor, I see many clients that don't understand how or why budgeting is important. Budgeting, at its core is knowing your numbers. If you don't know your income, fixed expenses, or variable expenses, then you can't fully understand your financial picture. 

What Should a Budget Include?

   At a minimum, your budget should include your income and expenses. A more in-depth budget should subcategorize your income(s) and expenses to truly see where money is being spent. There will be a future blog about different budgets. This blog is just the understanding of why we should be utilizing a budget. You might be asking "why should I use a budget if I feel fine financially?" The truth is that no one knows what the future holds for us; having a budget will ease the financial burden. 

But Budgeting is too Restrictive!!

    Many of you might be thinking to yourself a budget is too restrictive and I don't want restrictions on my spending. Well here's the key: your budget is yours to control, it's flexible and can be adjusted as needed. The reason one should have a budget is to track your spending, ensuring you don't overspend and jeopardize your future financial security.

The Real Purpose of a Budget

    The true purpose of a budget is to help you live within your means. Many people do not realize they are living beyond their means, often times relying on credit cards or loans to cover monthly expenses.If every month you are having to spend on a credit card or find yourself constantly taking out a loan then you are living outside of your means, even if making the minimum monthly payments are doable.

    The simplest of budgets will highlight this issue by showing a deficit. The budget will show the user they are living outside of their means, stealing from their financial future to cover today's expenses. Understanding and evaluating your spending habits will help prevent any long-term consequences.

Up Next: Building Your First Budget

    In the next blog post, I’ll walk you through simple ways to start your first budget, and will share a link to a budgeting workbook. The workbook includes multiple types of budgets, a debt tracker, and a financial goal tracker.