Budgeting – It is Essential
Regardless of how much you earn, you need a budget. Understanding and putting basic budgeting techniques into practice will help you in formulating a good financial plan.
First, let’s address the question.
Do you need a budget?
Do you spend or make money? If yes, you need a budget. You need to understand how much money is coming in, and how much money is going out. Doing so will help you in the following ways.
- You'll know where your money is going
- Set and reach your financial goals
- Save money for the future
- Get out of debt faster
- Create financial peace of mind
If these benefits sound good to you, take a look at some basic budgeting tips.
- Start simple. A basic budget need not be super detailed or fancy, and won't take you long to create. Start off by keeping track of how much you spend over one month in basic categories such as rent/mortgage, utilities, vehicle, food, household expenses, personal items, and entertainment, etc. The more accurate you are in tracking your current expenses, the more accurate your budget will be.
- Save receipts. If you spend money, record it by saving the bill, a copy of the check, a receipt from the shopping trip, or even by simply writing it down. Every single penny should be accounted for.
- Know how much you're bringing in. It goes without saying that it's absolutely integral to know how much money you have coming in every month. If your monthly income varies, calculate a close estimate based on the average of the past few month's incomes.
- Cut spending. After tracking your expenses, identify where you can cut back on the expenses. At least once a year, look into lowering your bills such as those of cable, insurance, and cell phone service.
- Don't give up. According to research, it takes the average person 66 days to form a new habit. It's always difficult in the beginning but pushing through the initial few months is always worth the effort. Consistent budgeting habits will ensure your financial freedom.