How and where do we start with savings and investments? These are the questions that come to us when we take our first step towards personal finances. We all want to make a lot of money but that can only happen when our 1st step is right – Budgeting. With budgeting you can create a plan and prioritize your expenses to help you save more and build your wealth.
One may feel budgeting is a headache and it makes you compromise on what you want. But on the flip side, budgeting allows you to buy exactly what you want by allocating money for it and understanding your financial limitations. For example, you wish to buy a INR 50,000/- watch but your budget, as per your financial ability to pay, allows you just INR 20,000/- to spend. So, either you save wisely and budget the watch in the coming months and if you want it now, lower down your needs.
Budgeting is a break-up of your income and expenses done regularly, mostly on a monthly basis, to understand what you have and what you can afford and how much you need to save for your future.
Let’s see some of the benefits of Budgeting:
Keeps you organized: When Budgeting, maintain an excel sheet or use an app and record all your expenses, from your utility bills, to gas bills and grocery spending, everything needs to be recorded. This way you will not only be organized but if any month your bill spikes up, you will be able to spot it.
Manage your debt: Some Debts are good debts too like a loan for buying a house as it improves your financial standing in the future. If you understand your debt properly and budget your expenses well, you can even save more and pay off your debts early. Also, when you budget you know how much debt or loan you can afford if you plan to buy something new.
Gives you the power: When you make a budget, you are controlling your money and not the other way round. You are able to see where your money is going and what are the expenses which can be cut down.
Prepare for Emergency: Emergency comes without informing and at a time when you are not at all prepared for it. Your budget should always include emergency fund which should come to approx. 3 to 6 months of your salary. When you are prepared for unplanned expenses, you don’t get hit financially when the situation arises. However, don’t put all your savings in emergency fund right away. Budget it gradually and build up the amount.
Keep an eye on your goals: Budget helps you identify your goals and how and when you wish to attain it. So next time you see any thing shining and interesting in a shop, you will think twice before stepping in. Either you can have short term pleasures with these things or enjoy your big goals like a fancy holiday or a car by keeping an eye on your budget.
No more sleepless nights: People who spend sleepless nights thinking how they will pay the bills are allowing their money to control them by not budgeting. When you know what you have and how you can spend, you don’t need to toss and turn around thinking how are you going to manage your expenses.
Have a happy retirement: We all want a good life after retirement and that can happen with right budgeting and saving habits. Though you make small sacrifices right now, the big picture is going to be really glorious. You did rather go for a beach holiday than work at a grocery store in old age to make ends meet.
These are just the tip of an iceberg, but budgeting has many other advantages and it is one habit that will help you prosper in life and attain your dreams and goals.
In my next blog I will share tips on how to budget in simple and easy steps. So, stay glued and don’t forget to leave your thoughts, experiences and views in the comments below.
Till Next time,
This blog is a part of Blogchatter’s #blogchatterA2Z challenge.