Why Everyone Needs A Budget

Have you ever done the quick math on how much money you should make every month? You crunch some numbers and tell yourself “That’s actually not too bad! It certainly doesn’t feel like I make that much”. You then go on and do the math on how much money you’ve made since the beginning of the year and ask “Where did all my money go?”.

This is a common realization many people have. In today’s busy lifestyle, with so much going on around you, it is easy to lose track of your spending and goals. Consequently, proper budgeting is crucial in keeping your finances under control.

Let’s go through some benefits of maintaining a budget.

Prevent Losing Track of Spending

How much do you spend on takeout coffee? What about video games? How many books do you buy a month? You probably have a recurring expense that you make often and not realize how much money you spend on it. You may spend money regularly on an expense without realizing how much it really cost.

Let’s say you have a cup of takeout coffee every morning before work that costs $3. That’s $15 a week and roughly $60 a month. If your budget is tight, this is a massive expense that you don’t realize you are doing. By identifying these expenditures, you may save money and reduce your expenses. A solution to the coffee issue can be to invest in homemade coffee. This doesn’t mean eliminate takeout coffee entirely, just reduce it.

There are many transactions that you may lose track of easily, such as eating out, clothes shopping, going out on weekend, and more. A well-tracked budget will shed light on your over expenditure and help you reduce expenses.

A Budget Can Help Manage Debt

Debt sucks! Unpaid debts can sometimes act as a thorn in the side when you want to manage your finances. We live busy lives and sometimes setting aside enough money to pay your debts can be difficult. Unfortunately, the debt grows exponentially, meaning that it gets out of hand quickly. The unpaid debt will skyrocket if you do not attend to it.

Putting money aside to pay at least the minimum requirement for your debt can be a laborious task. However, with a budget, you can control your spending, and help you make your debt payments by carefully keeping enough money for the payments. With a budget, you may also identify a way to pay your debt off sooner by making extra payments with the leftover spending you may have.

It will surprise you how much money you can gain by moving your expenses around a little and eliminate your debt quicker than you thought!

Creating Financial Goals and Getting Things You Deserve

Have you ever truly wanted something but thought there is no way you can afford it? This can vary to traveling abroad on holidays, saving up for a mortgage down payment, a fishing boat, a new car, create college funds for your kids. These are all possible when you make a well-planned budget.

Let’s say you have a newborn and want to save for their college right away. Your goal is $40,000. Over 18 years, this is $186 a month (even less if invested properly). Making room in your budget for this is much easier than when your kid gets to high school, and now you need to come up with $40,000 in a couple of years.

How about you want a new laptop in about 5 years. You are willing to spend $500 on the laptop, meaning you only need to set aside $8 a month. So when the time comes, it won’t even faze your bank account since you’ve already been saving for it.

Creating a budget will help you obtain these goals. Your budget will remind you of your financial goals and will set up a way for you to set money aside so you can purchase things you never thought would be possible.

Helps You Live Within Your Means

Unfortunately, you may spend money on expenses that you can’t afford. You can easily identify over expenditures when you budget your finances.

With all your spending spread out in front of you, it is easy to find peaks in your spending that you can’t afford. Sometimes there’re products and services that don’t fit your financial situation. This can be spending 50% of your income on rent or 75% of your food expenses on eating out.

These issues won’t be noticeable until you break down your expenses with a budget. Knowing your financial limits can really help you manage your expenses and getting your life on track.

Helps You Set Retirement Goals

Let’s face it, if you’re far away from retirement, you have giving little thought to it. You may have something through your employment, or relying on your government’s retirement plan. However, you may realize that it may not be enough, especially if you want to retire earlier than average.

Creating a budget and setting aside money for retirement is easy to do if planned ahead. Figuring out how much money you can set aside and invest in a retirement account that will grow over time is a massive benefit for your retirement.

Having extra money for retirement will help you have more control over when deciding your retirement.

It Will Help Your Relationship With Your Significant Other

It’s no surprise couples fight over money. This is because of the misunderstanding of how much you can afford and how much you can’t. Not knowing your budget can add stress to the relationship when you or your significant other purchases something.

Creating a budget will help the two of you communicate your finances. You will work as a team and identify where all your money should go. Then, when a purchase happens and money is spent, you guys are working together as a team instead of against each other.

It won’t be you vs. your partner, it will be you two vs. your budget.

You Can Setup An Emergency Fund

There are many unexpected events that can happen in your life that can affect your finances. This can be a car breaking down, roof leaking, losing your job. A lot of this can play with your mind and add stress.

Creating a budget allows you to plan an emergency fund, meaning you build a bank of money for unexpected expenditures. Now, if anything goes wrong and you need to spend some money, it’s not a big deal because you have a lump of cash to pay for it. Once you use some of your emergency funds, you then start to replenish it again.

How much should you have in your emergency fund? Minimum, you should have at least 3 months of your household income. However, it’s much safer to have at least 6 months, and in some cases 8 months to a year.

Prevents the Feeling Of Being Overwhelmed

Not knowing how much you spend, not knowing how much you can spend and/or how much you make can feel overwhelming. When purchasing something and not knowing if you can afford it or should afford it, you get a negative emotional reaction to the transaction. Your heart may sink a little and even though you might still be excited about the purchase, you still may feel bad about it.

A budget will help you understand what you can spend your money on. Understanding your financial position via a budget diminishes the negative feelings of purchasing items you want. You can then feel good about making purchases.

Allows You To Enjoy Your Money

As stated previously, instead of fearing spending your money, you feel good spending it. A budget helps you set aside money for things you need in life, and the things you enjoy in life. Thus, you will stop feeling bad about spending money on yourself and feel good about it. You will enjoy spending money on new clothes or going out on dates or eating yummy food.

Helps You Adapt and Organize Your Life Quickly

Life can be chaotic and things change quickly in life. This can be a new debt entering your life (such as a lawsuit or a car accident), you discover a new hobby, or you get a job change (increase or decrease in salary).

Having a budget will help you tackle these financial changes quickly. You won’t need to worry about the effects because you will have the numbers right in front of you. Start moving your budget around and stabilize your finances once again.

Helps Produce Extra Money

I won’t go into the details about investing money, but a budget will help you set aside extra cash so you can invest and grow your money. Investing money is a great way to get ahead financially. However, some people find it complicated to have extra cash on the side to invest. A budget will help you squeeze some additional money and use it for your investments.

Conclusion

Budgeting obviously has immense benefits for your financial health. It is recommended that everyone plans a budget. But where to start?

Pocket Budgeter is a fantastic place to start! It helps organize your budget and keeps track of your spending and earnings. Budgeting with a partner? That’s fine! Pocket Budgeter will sync all the data on each device. The application is free to download and use. Don’t want to enter all your purchases manually? Well, Pocket Budgeter has a premium account that allows you to link your bank account and let your transactions automatically get uploaded to the app!

Categorization plays a big role in the application, and it facilitates the process of categorization. You can find a link to the App Store here

https://apps.apple.com/us/app/id1528795325

And a link to Google Play here

https://play.google.com/store/apps/details?id=com.pocketbudgeter.pocketbudgeter

Thanks for reading! Until next time.

Originally published at https://blog.pocketbudgeter.com on November 12, 2020.

Jordan Goulet is the Founder and President of Pocket Budgeter Ltd, a mobile application that helps people manage their budget.