Frugal Living

Why You Need To Budget For Financial Wellbeing

Whether you are into frugal living or are a top entrepreneur, having a budget for what you spend and when is an important part of securing your future. Many people see personal budgeting as a task to be avoided at all costs, but it is actually the best way to be able to get exactly what you want. Make lists of your needs and wants, and then amend these based on the actual money that you have available.

Three reasons a budget is crucial

Control spending

By recording what you spend, you are able to keep it under control by knowing exactly what it is that you have spent on various budget lines or household expenses. If you do not keep an updated budget, you will have no real idea of how much you spend. You will have a basic idea of how much income you bring in and a vague idea of how much you spend, but it will be easy to spend above your means. Access to a credit card or an overdraft means that there is often no reason to stop spending, especially if you are uninformed as to your exact financial position before a big spend.

Track expenses

A budget will allow you and your family to see what it is you are spending money on, but to allow it to work, you must track all of your spending. It’s easy to do, as these days, all your spending will appear on the monthly statement and can be seen at the click of a mouse. Rather than only looking at this at the end of the month, you need to keep an eye on this throughout the month and be able to put the reigns on spending if you have reached the maximum spend on a particular budget line. There are a number of free budget applications and programs you can use to do this online that have made tracking expenses a seamless process of updating the app after every expense and having a limit at which it will notify you when reached.

Save more money

Knowing what you spend and controlling this allows you to put some money away. This is a twofold requirement. Firstly, there will always be unplanned spending, for emergencies such as hospital bills or unplanned home repairs. If you have not been able to put away some money on a regular basis, you will not be able to afford these emergencies. Then there is the delayed spending aspect of saving, whereby you simply defer the spending until you have the cash. This way you are able to buy what you want, just not always when you want. Yes, you could use credit cards for these spendings, but this is not the way to get ahead and using credit for luxury or whim buys will only deplete finances and lead to financial insecurity and debt.

As aforementioned, even the entrepreneur who may be comfortable with risk taking only does so with the knowledge of what they can afford to risk. As long as you have put money aside for a specific reason, then there is no problem spending it. A budget is simply the process of recording what you earn and then tracking what you spend in relation to this against a set plan. In doing so, you will be able to take full control over your finances and get ahead financially. Whether you are saving for a big purchase or simply trying to work your way out of debt, start with a simple budget and stick to it.

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