It is very important to make a budget if you are aiming for financial security. It is necessary if you want to live the life you want. We know that it is not an easy task to keep a record of your expenses but neglecting the fact that tracking every expense has a huge impact on our spending. It is like you are bridging the gaps if you are budgeting everything. It may not result in issues if you are neglecting the maintenance of your expenses for a longer period of time but it can lead to disastrous results.
With savings, you can also plan to startup a small business but ensure you have developed a business plan for startup. Cut off costs that can be replaced with cheaper way outs. For instance, for invoicing, use simple and inexpensive software like an invoice generator rather than wasting huge sums of money on it.
Well, there are many benefits that you can enjoy by making a budget and keeping track of all your expenses. A few of the key benefits are unfolded in the information provided below.
- Control your life
Life throws enough lemons on you, so start learning how to make lemonade rather than wasting the lemons. No more promises to do it tomorrow or when you need a raise or you want to win anything. Take out half an hour from your routine, sit down on your comfy lounge sofa and regain the driving seat of your life. No matter how well equipped you are financially, but you must be aware of the key facts that are,
- Your monthly income v/s your monthly expenses
- Understand that life is more costly from your consideration
- With awareness and knowledge, you can be successful
If you have control over the stated key facts, you are on the right track. Hence, by channelizing your expenses, you are taking control of your life.
- Build Discipline
Budget will help you in staying disciplined by organizing your finances. You cannot get a glimpse of your financial health if you do not have easy to read and readily available data. If you have developed a routine of managing the finances through budget then it will be only a matter of minutes to up-to-date the information on a daily or weekly basis.
- Force you to take your finances seriously
It is not the benefit that is only dependent upon the budget (as various other factors also contribute to it) but it can be a side benefit. The more time you give to planning your expenses, the more focused you are on building your wealth. When you will spare time thinking for money, you can extract ways of saving money and generating income.
- Early Warning System
By keeping a track of your finances on a regular basis and developing monthly budgets can serve as a crisis prevention mechanism. It can be an early warning system with information about when you can be short of money and how you can save a few pennies.
- Knowledge is Power
As stated, by tracking your expenses, you will be well aware of how much money you can save every month. You can even set an emergency fund for yourself ensuring that you have enough finances if any unforeseen situation emerges. You can consider crisis preventive planning by figuring out how financial health will be changed after having a child or losing a job.
- Quantify your progress
We all want to save some money by making more money and reducing our spending, but it is not possible without keeping track of your budget. It is not a benefit that budgeting your finances can help in measuring progress but it is a prerequisite. You can become more efficient at saving money through it.
- A family discussion initiator
Money discussions always lead to hard talk. If you involve your whole family in developing the budget and tracking your expenses, this discussion will become easy. It is good to list down the facts while discussing financial health and your whole family will be well aware of everything. Your kids know what your current financial health is and how it can be better in future. It will also help in building the financial management capacity of your children.
- Relieve your stress
Keeping track of your expenses is not only beneficial in terms of savings but also has a positive impact on your health. When you know your exact financial health, it will lift the stress from your shoulders. When you know how much money you have and how you can make more, you will be relieved. Along with that by having an emergency fund, you are also preparing yourself and need not be stressed about how you will arrange money in case of any emergency.
Budgeting about how you will spend your money is challenging if you are doing it for the first time. Following are a few key mistakes you should avoid if you are developing a budget for the first time.
- Calculating and developing a budget on your actual salary means you must be aware of your home-take income (after tax deduction).
- Understand all your expenses even if you are living with your parents, make a realistic estimate of your expenses. The rule of thumb in this regard is that you will be spending 30% of your home-take income but it also depends upon where you are living and how much you are earning.
- Be organized and track whatever expense you are making rather it is big or small. Even a small expense can make a huge difference in your overall planning.
- Keep in mind that at the end of the day what matters is savings. Plan accordingly. Delete the useless expenses from your budget and try to save that money. You might not see it as beneficial currently but it will be very helpful for you in future.
