(DailyDig.com) – Many people shy away from creating and sticking to a budget – it’s too much work, they don’t have enough income, budgets are too confining, etc.
Most of the excuses, however, reflect the reasons people really need a budget and really need to stick by it month by month and year by year.
Consider these five reasons everyone needs a budget:
Budgets Help Prioritize Spending
Housing, food, and utilities are given expenses everyone faces, but once those are covered in a monthly budget, the remaining income can be directed to a person’s or family’s priorities. Those priorities will vary from household to household but could create a path for saving for a new car, a house, or a long-dreamed-of vacation.
The budget also allows for other necessary purchases, such as clothing, household items, and electronics, but would prevent splurge purchases as the person knows they need to stay within the budget in each month.
Budgets Point to Spending Flaws
Oftentimes, spending small amounts of money on a daily basis creates sticker shock by the end of the month that the person didn’t even realize they were committing. That daily cup of coffee and pastry at the corner coffee shop may not seem like a big deal but could add up to $100-$200 a month, but brewing the coffee at home and skipping the pastry could save $100+ for a higher priority.
Also, the woman who needs every new purse she sees or the man who has to get the newest sneakers each month would quickly realize what a chunk those take out of savings.
Budgets Prepare for Emergencies
Nothing points out flaws in spending more than those emergency repair bills to a car, home, smartphone, or computer, or a minor medical emergency that’s not covered by insurance. A person can feel like they are sailing along pretty well with their spending until one of these big bills crops up unexpectedly, suddenly leaving them behind the eight ball.
A budget allows the person to build up an emergency fund that should cover three to six months of normal household expenses so that even if hit by a major emergency, such as a job layoff, the person doesn’t have to borrow or rely on credit card debt to cover expenses.
Budgets Reduce Financial Stress
Once living within a budget, an individual or couple will find that financial issues no longer create the stress they previously did. Couples in particular suffer strains in their relationship when finances are a constant problem. Once they develop a budget, discuss it monthly, and agree on their spending priorities, the miscommunication and resentment around financial issues all but disappear.
An emergency fund also eliminates those sleepless nights that are inevitable when another bill suddenly comes due and/or overdue without any clear path to pay it.
Budgets Create Freedom to Spend
While a budget is designed to put the brakes on out-of-control spending, in many ways it frees up spending in so many areas. Instead of constantly worrying about whether a person can afford to spend money on a vacation or a new pair of shoes, they know it’s in the budget and the money is available. Once dining out a couple of times per month is included in the budget, a couple can enjoy a nice date night without worrying that they are spending the kids’ new school clothes money.
After all, the real purpose of a budget is to allow a person or family to gain control over their spending, to live within their income (or have the incentive to increase their income if they find they cannot), and to enjoy the fruits of their hard work, starting right away and through retirement once that their savings have started to build.
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