You need a budget! Point, blank, period.
Many people tell me that they are already great at saving money. Or that they know what they spend their money on and spend that money frugally. But even these people can and will benefit from having a budget.
Listen here and listen close; you need a budget! You cannot fully benefit from personal finance hacks without a budget.
Let me tell you why you need a budget!
You Need a Budget
Reason # 1
Budgets tell what exactly you spend your money on.
We Americans spend money on a lot of things. We spend money on rent, car notes, insurance, food, utilities, clothes, and restaurants. And of course the unexpected like towing fees, health care clinics, stolen property, and car maintenance.
Where is all my money going? Why don’t I have as much money as I thought I had?
Answer: You need a budget!
A budget is the only way you can account for everything we Americans spend money on. Once you know how much money you spend in a given day, week, month, and even year is the only way to improve.
Improve by knowing what to expect each month. You may find out you are paying for expenses you did not know about before!
And if you uncomfortable with how much money you are spending on something, you can stop paying for it / cut it out entirely.
But you wouldn’t know this information without a budget.
Reason # 2
Budgets let us know what to spend.
Another reason why you need a budget is to know how much money to spend. There are times we think that spending a little more on this and on this is not that big of a deal. It doesn’t cost that much.
Well it adds up.
To be fully in control of your finances, you need to know how much you want to or need to spend each month on certain products and services.
Put them into categories like this.
Say you spend $50 more at bars and restaurants this month. And $25 more in gas and $30 more in food this month.
You went $105 over budget for this month!
It may not seem like a huge deal, but it if you kept spending like this every month, you would have wasted over $1,000 that year.
That $1,000 could have gone to your debt, rent for two months, or your savings. Instead you spent it on expensive meals and cocktails.
Budgets Encourage Smarter Spending Habits
Now that you have your budget set, you know how much you are going to spend each month. You may be thinking that there is little wiggle room with spending. But we are smart with our money.
We start to think of smarter ways to spend our money. Once we start to get an understanding for our budget, then we think of more efficient ways of how our money can be spent.
Say our budget for food was $400 a month. That’s about $100 a week for groceries. If you are used to spending more money each month by just buying whatever, this will effect you the most.
You will probably start to realize that sticking to your budget is kind of hard! There are so many things you want to buy and feel limited for the first time when spending money that you do have. Well it is hard, at first.
But you will soon start to spend your money smarter. Buying food with more coupons, sales, discount cards, rewards cards, purchasing from different stores, etc.
Without commitment, it almost will never happen. You need a budget!
You Make and Commit to Financial Goals
Financial goals do not always pertain to retirement plans. A big reason why you need a budget is so that you make financial goals.
When you make a budget, you are making small to mid term financial goals.
This may be the first financial goals that you have ever made. This is great! You are already making plans to better yourself in the future.
But budgets always help you commit to your financial goals. Your financial goals may be the ones you just set (your budget), or it could pertain to other financial goals you have.
Since you have written them down, they are real now. You will try your hardest to keep loyal to your financial goals.
If you fail at your goals, that’s okay! We are only human and you have already have experience with the process.
But you need a budget!