With your goals set and motivation in place, let’s move on to your action plan (can you tell I seriously love planning?). Most of you have set at least one of these goals (of course, in a form of SMART goals):
- Increase your savings;
- Create an emergency fund;
- Decrease your expenses;
- Be debt-free.
You know what all these have in common? The starting point is always the same- BUDGET! It’s impossible to save more if you don’t know how much you are saving right now. Or decrease your expenses, if you have no idea how much you spend on your leisure, groceries and other categories. And what can help you with this? You guessed it! Budget is your new best friend!
“A budget is an estimation of revenue and expenses over a specified future period of time. It is compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a family, a group of people, a business, a government, a country, a multinational organization or just about anything else that makes and spends money.”
If governments, multinational companies are using budgets to plan their finances then why wouldn’t you overtake the best practice?
Budgeting 101
This is the first part on the post series on Budgeting 101. The series will include more posts on how to track your income and expenses, what are the best ways to save more money and how to cut down on unnecessary expenses. Let’s see how it goes, but “fingers crossed” you’ll find it useful.
Today we will cover the ultimate question: “Why you need the budget?” The intro might have given you a few ideas, though there are many more worth mentioning.
Latoya Scott views a as:
“simply a plan for your money. It’s a way of telling your money where to go instead of worrying where it went at the end of the month. Whatever is your financial situation, a budget will ensure you know where your money goes and ensure you achieve your financial goals!”
Benefits of a budget
Provides you control over your money
Have you experienced that feeling when you start your week with EUR 1000 in your account and in a week’s time the account balance says EUR 303.98? Your first thought- somebody has got to have hacked your bank account, because you definitely didn’t spend that…
Well, you did! And a budget will show you the ugly truth straight away.
It lets you follow on your money ways easily showing all your biggest financial pet peeves, early warning signs for any potential problems and whether Starbucks coffee and avocado toast is the reason you are not able to make the deposit for your first real estate property!
Moreover, you’ll be able to identify the expenses that can be cut down in case of emergency or in your everyday life. Overall, you take control over money!
Lets you track your financial goals
Lastly, budget will remind you to avoid unnecessary spending on items that does not bring any future value in reaching your financial goals.
Have I convinced you that you need a budget now? If yes, great!
No? Then there must be a different way how you follow up on your finances. Feel free to share your hacks with others in the discussion board or on my Facebook or Instagram page.
Subscribe to receive a notification when a new post is posted so that we can start budgeting together! See you soon!
Posts in the series:
1. How to create a budget (Part 1)
2. Abundance vs. Scarcity Mindset
3. 5 Reasons You Overspend Your Budget