Benefits of Setting a Budget

 

You may never have planned your life with a budget before, so now is the best time to start budgeting, before you wonder (again) where all your money went. If that's not a good enough reason, I present ten more reasons on why setting a budget is good for you:

 

1. Knowledge. Knowledge is power, after all, and budgeting lets you know just where your money goes, down to the very last penny. It's a self-educational tool about allocating your funds. Knowledge is the very first step to controlling your money. 

 

2. Control. A budget helps you keep yourself in charge of your money, and not the other way around.  Aside from knowing where you spent your money (after the fact), a budget helps you control where your money goes (before the fact).  If you keep a good handle on what you can afford, you will be less likely to spend money that you don’t have, and therefore less likely to increase your debt.

 

3. Organization. This is key. A budget will naturally call for some organization and this will motivate you to keep a simple filing system, at the very least, of your receipts, bills, and other financial documents. That way when the time comes for you to file your taxes you won't go berserk looking for all of those documents you stashed in one of your many filing shoeboxes.  The added benefit is that if you organize your expenses, you may be able to pay less tax. If you don’t keep track of your deductible expenses, you will end up not deducting them, thus paying more than you need to.

 

4. Communication. You probably know the subject most couples fight about: money. Budgeting opens up the lines of communication between couples so they can rationally discuss where the money will go. Also, involved parties will develop a sense of control and they will feel like they are not being left out of the financial process.  Remember that financial decisions affect the entire family, not just one person.

 

5. Risk-taking. If you've ever wondered if you could afford something, a budget will eliminate that lingering question in your mind, now that you know your financial status and are practicing some control over it.

 

6. Extra time. Since everything's already organized for easy filing access, you don't have to fumble around wasting time looking for all those transaction records when there's a query that needs answering.

 

7. Extra money. Once you know where your money goes, you can pinpoint all those unnecessary expenditures and eliminate them. Ta-daa! Extra money on the dot, provided you can make do without some unnecessary pleasures that will keep your money from being put to better use.

 

8. Goals. If you ever wondered whether you could afford that car you've been eyeing for a while, budgeting will help eliminate that question and help you stick to a plan that will make you afford that car or whatever other major purchase you've been planning on. It will keep your mind set and will steer you clear from impulse buys.