Keeping track of your financial goals: The importance of budgeting for individuals and families
21 Jan 2023
As we begin another new year, it is time to lay down a fresh blueprint of goals and aspirations. At this juncture, the usefulness of having a budget in our daily lives cannot be overemphasized. What is a budget? A budget is simply a financial plan that takes into account both current and future incomes and expenditures. Armed with a budget you can keep your spending in check. You will also stay informed of your savings and whether they are on track for the future. In the current market scenario, budgeting is even more important - a wise budget seeks to ensure you and your family have financial security and are working effectively to achieve financial or lifestyle goals.
Below are some reasons why everyone should stick to a budget:
- It helps you keep track of your long-term goals
A budget forces you to charter your goals, save your money, keep track of your progress, and turn your aspirations into reality. If you spend aimlessly, a major milestone like building a house or starting your own business will never see the light of day.
Having a budget will help you live within your means and save for a rainy day.
- It helps you to keep away from spending money you don't have
We are living in the age of plastic, and most of us tend to spend money that we don't have. People abuse and overuse their credit card spending limit, and they do not realize that they have overshot their spending capacity. The end result? They are drowning in debt.
However, if you have budgeted your expenses, you will never find yourself in such a precarious financial position. This is because you would know exactly how much you earn, how much you can afford to spend each month, and how much you need to save.
- You are better prepared for emergencies
Life brings with it, unexpected surprises, and there is always something waiting around the corner. Getting laid off, falling sick, or even a death in the family, all these and other incidents can lead to financial turbulence. That is exactly why we all need an emergency fund.
An emergency fund consists of at least three to six months of your expenses. When a life crisis occurs, this emergency fund will help you brave the storm. Although building up an emergency fund could take some time, it is well worth the effort.
Start small, build it into your budget, and watch your emergency fund slowly grow.
- It leads to a happier retirement
Just as spending your money wisely in the present is important, it is also prudent to save for the future. Working with a budget can help you do just that. Building investment contributions into your budget could be very wise in the long run. Try to set aside a portion of your earnings every month, and use these to contribute to your IRA, 401(k), and other retirement funds. Eventually, you will find that you have built yourself a nice nest egg. Even though little sacrifices will have to be made, it will be worth it in the long run.
- It will address erroneous spending habits
Following a budget scrupulously urges you to take control of your spending habits. You can ascertain the items or areas you are spending more than necessary on. Ask yourself the question - “Is this a necessity right now?” You can then determine the cost/benefit of the expense. This will help you to rethink the way you spend money and re-align your financial goals and objectives moving forward.
Some takeaways of having a budget in place
A budget helps you to be financially stable. It becomes easier to track expenses, pay bills on time, start saving for an emergency fund and save for milestone achievements, like buying a house or starting a business. Overall, a budget puts you on a strong financial footing, resilient enough to face both, day-to-day and long-term financial challenges.
Over the years, Forward Devils Lake has offered many different types of technical assistance. Budgeting is one of them. Drop us a a line here, and we shall be happy to assist you in your financial endeavors