A budget is a financial plan that helps you keep track of your spending habits over a period of time, usually for a month or year.
However, a lot of people do not practise budgeting or know how to create a workable personal budget. Grabbing a bunch of money and spending it feels a lot easier for them than creating a financial plan that helps them keep track of their money.
Having a personal budget saves you from financial disaster. Budgeting helps you identify your income, also your expenses during the period budgeted for. It also helps you make realistic financial goals.
Essence of budget
Below are five reasons you need to have a personal budget.
It helps control to spending habit: One primary thing having a personal budget does for you is that it gives you control over your spending habit. When you do not have a personal budget, you tend to spend money in excess or at any chance you get. You spend money you do not have, buy things your income can’t sustain and then run into debts and can no longer afford the basic things you need.
But having a personal budget and knowing what each amount of money is to be spent on gives you control and prevents you from spending without a plan. In other words, a personal budget helps you live within your means and tells you when to stop spending.
It helps you set and achieve your financial goals: A lot of people have long term and short term financial goals. You have things you want your money to do for you but, because you do not have a personal budget that helps you keep track of your spending, achieving your financial goals looks like an impossible task.
Having a personal budget helps you to prioritise your spending. You assign your money to things based on their level of importance. That way, you have your money going to the right places and you can achieve what you set to do with your money.
Creating a personal budget helps you set aside money for your goals.
It helps you to have a savings culture: Saving money is still one exercise a lot of people find very difficult; but with a personal budget, the process of saving becomes easy. Having a personal budget helps you set aside money for different things. That’s one way you can imbibe a savings culture.
Life is very unpredictable and things happen that we do not plan for. You need to have that extra cash to rescue you in those situations. With a personal budget, you can work towards keeping a percentage of your income for emergencies and have the discipline to save it.
Saving is one way people have been able to add flexibility to their lives and keep themselves afloat without incurring debts.
It helps you to worry less: Having a personal budget makes you worry less. A personal budget helps you to prioritise your spending. You do not bother about what you need to do with your money or what expenses have not been covered or how you plan to pay a bill.
Having a personal budget helps you prepare to take on financial duties with confidence. If you do not have a budget, you are most likely going to overspend, and that puts you in a position where you do not have sufficient money to take care of your needs, which makes you worry.
It helps keep you organised: A personal budget is one way you can organise your finances. Without a personal budget, you probably wouldn’t know how much you spend daily or monthly. You can’t account for what you do with your money or know where your money goes to.
But with a personal budget, you can make every money count. You arrange your budget into different categories that clearly define how much has been assigned for each.
Your financial lifestyle takes a different outlook with a personal budget because you aren’t spending just on anything.
A personal budget gives you a sense of organisation, and it shows in what you use your money for and how you spend it.
