If you want to get better at managing your money, a budget is the first place to start. We find it amazing how many households don’t use a budget. It is the best way to determine what you’re spending your money on, help you keep your spending under control, and it’s a great way to save money to prepare for your future.
For some, budgeting is a no-brainer. For others, it can be hard to know why it’s so important to have a personal budget plan. If you belong to the latter, keep reading to learn some basic reasons why it’s important to create (and stick to!) a personal budget.
A personal budget plan will help you stick to your financial goals
If you’re like most Americans, you likely have several different financial goals. These goals will vary from person to person but can include things like a nice family vacation, a new car, paying off your mortgage, or maybe your student loans. Or, maybe you’re being smart and thinking about your retirement!
Whatever your goals are, a personal budget plan will make it easier to follow through. It forces you to be intentional about your spending and saving, keeps track of how much progress you make, and eventually helps you reach your financial goals. And, what’s more satisfying than that?
A personal budget plan will help you stay out of debt
You’ve all heard how important it is to ‘live within your means.’ A personal budget plan will help you to actually do so, as it does exactly what it says it will: create a plan for your money.
If you create a realistic spending plan, you’ll always have enough money for the things that you need. I say realistic because it’s important to tailor your plan to your specific situation. A single person who makes $40,000 a year will have different priorities than a mother of three who makes $80,000 per year.
This idea will also help those of you who have already accumulated debt and are trying to pay it off. If you follow your realistic plan closely, you’ll be debt-free in no time (or, at least in the time that your budget tells you it will take).
A personal budget plan will bring to light bad spending habits
As you’re building your budget and looking at what you spend your money on, you’ll likely notice a few bad spending habits. For example, instead of doing one large grocery shop every 1 to 2 weeks, maybe you’re in the habit of stopping by the supermarket every few days. Or, maybe instead of waiting for a sale at your favorite clothing store, you stop by every Friday after payday. And, how many coffees to-go do you buy each week? These are small habits that you may not even realize are bad for your wallet. A personal budget plan can put these things into perspective.
And, in our experience, the most important reason to have a budget, is that without one you have no way to measure your current ability to save, and no soccer field on which to place your financial goalposts! We’ve been rewarded so many times by providing clients with opportunities not just to save, but spend more on the things they care about once they have a budget in place.
Make sure to review your budget monthly
After you’ve made your personal budget plan, it’s important to review it every month to make sure that it’s working in your favor. And, as you work towards paying things off or putting money into your savings, you’ll likely develop more goals! Like you, your budget will grow, mature, and change over the months and years. Just remember, no matter how much it changes, a personal budget plan is for life.