Every person could benefit from having a budget they actually stick to, even people who make $100,000+ a year. Budgeting isn’t just for the super frugal anymore. Everybody knows what a budget is but they never really dig into the actual reasons why budgeting helps you in ways you could never imagine.
What is a budget?
Just in case you’ve been living under a rock and don’t know what a budget is, let’s quickly discuss what a budget is and how it works. A budget is a plan that is created for your money that helps you plan for the things you need AND the things you want.
A budget lists your total income and your total monthly expenses and it creates a plan of where you’re going to allocate that money before it all disappears into the depths of cash registers and your couch cushions. A budget is a key step in hitting all of your financial goals, no matter how big or how small.
5 Reasons Why You Need a Budget
#1 – Budgeting Forces You To Have a Real Conversation About Money
When you sit down and start creating your first budget you have to really take an honest look at what you can afford and what you shouldn’t be spending your money on.
I’ll admit that a ton of us (including me from time to time) live about our means and a lack of a budget is a huge contributing factor. It’s really important to start figuring out where you can cut things from your budget to stop living above your means because it’s only going to hurt you later on and you’ll never be able to have the life you truly want.
During your budget creation you’ll be able to think of all the ways you truly want to improve your life and you can create ways that will help you get to your goals!
#2 – Budgeting (surprisingly) Makes You a Happier Person
Money is one of the biggest stressors in so many people’s lives and giving your money a plan can take sooooo much stress off of you and especially off of your relationship. So many couples end up fighting about money at least a few times a year depending on their situation, and most of the time this can be minimized by just having a budget and being able to openly talk about money stuff with your partner.
Sticking to a budget reduces stress for a single person as well, everybody worries about money on the daily, so it doesn’t matter who you are. Not having a budget will severely impact your happiness! When you have a budget you know exactly how much money you have to spend, and you’ll never walk up to that cash register wondering if your card is going to get declined again…
#3 – Budgeting Helps You Prepare for the Future
The best part about a budget is that you can take the time to imagine your ideal day in 5 years and work backwards from that. What does your ideal day look like? What kinds of things have you accomplished? You can work all of these ideal situations into your budget.
How do you plan for the future? Well, there are these awesome things called Sinking Funds that allow you to save up for things by putting a small amount of money away each month towards a specific goal. Let’s say in 5 years you see yourself with a gorgeous downtown apartment and a puppy. You would create a dog sinking fund and a first & last month’s rent sinking fund. These two things will help you work towards your goal without it making a big dent in your daily life because you’ve budgeted monthly for these things.
Another awesome thing that budgeting helps you with is being prepared for unwelcome emergencies. You can budget a certain amount of money each month to go into a specific account that’s just meant to cover these expenses that you can’t be prepared for, this account is called your Emergency Fund.
#4 – Budgeting Stops Impulse Purchases
Budgeting makes you a ton more aware of your purchases which means you won’t be buying an extra box of cookies or buying an extra bathing suit that you don’t really need. If you’re a chronic overspender, you should check out this blog post that will help you break those habits!
Having a budget (especially if it’s a cash budget) ends up making you think harder about these unnecessary impulse buys. Think of it this way, if you know you’re digging into your grocery budget when you buy that extra bathing suit, you aren’t going to have enough money to eat for the rest of the month. This will teach you a real lesson in self-control when you’re starving and eating saltine crackers for dinner.
#5 – Budgeting Actually Makes You Healthier
The thing is, when you start budgeting the very first thing that gets cut is junk food & other unhealthy habits. For example, if you’re a smoker you may try and cut back on your habit. If you’re a snacker you’ll try and cut back on the candy and chips.
Budgeting will make you drink more water, because water is cheaper than soda or redbull. You’ll also cook at home much more often because eating out is way too expensive!
Just think of all the crazy parts of your life that budgeting will help when it comes to your health!
So, Which Budgeting Method Should You Try?
Personally, I’ve tried every budget in the books and failed a million times. It’s honestly like a diet and exercise regimen, you just have to try everything until one sticks.
The budgeting method that has worked best for me is the Zero-Based Budget because it’s so straight forward and doesn’t leave much room for interpretation. Zero-Based gives you a plan for every single penny which makes messing up a lot more difficult.
Budgeting is one of the absolute best ways you can improve your finances and I highly suggest you start working towards a budgeting system that works for YOU, don’t just try and use one for a long time because someone else says it works. You budget doesn’t have to be perfect, but I promise it’ll be worth it.