Why Everyone Needs a Budget

Perhaps you don’t see the point of writing down and tracking your bills each month. After all, you pay your bills and your system has worked so far. However, if you don’t track your money you may be spending far too much in some places and not enough in others to ever achieve the kind of financial success that affords you a comfortable lifestyle.

Realize Your Goals

By tracking your money and reducing your expenses, you can begin to free up money. As you eliminate or reduce a bill, take the extra money and create a savings plan. With the account or savings envelopes, if you should choose to go that route, you can use the saved money to pay for college tuition, buy a new car, put a down payment on a new home, or plan a lavish vacation that you’ve only dreamed about until now.

Monthly Bills

Having a budget also lets you keep an eye on your monthly household bills. If one suddenly rises out of the normal range, you can review it closely and then if necessary contact the service provider. The same goes for your insurance. If the rates go up seemingly without reason, you can use the opportunity to get homeowners, auto and motorcycle insurance quotes for free. And, if you own a home and a motor vehicle, many of these same insurance companies also offer a discount for bundling the services, so you can save even more money.

What You Can Afford

A budget gives you a clear understanding of your finances. If you find at the end of each month you have nothing left over for you, it’s time to change things. You have the ability to reduce your debt and change your current spending habits. For example, if you have five credit cards that are at or close to their limit, you are using them the wrong way. Having credit cards is a wonderful way to have a backup plan and even earn rewards. However, if you use the credit for daily purchases and then cannot pay the accumulated balance entirely each month, you’re not only harming your credit score but also adding on interest fees. A budget can identify areas of weakness and open your eyes to it before it costs you more money.

Tracking Your Money

Once you create a budget you get to see exactly where it goes each month. This gives you the opportunity to track what you spend and where you spend the most. If you’re new to the concept of budgeting, it’s going to reveal your spending habits. But knowing where your money goes, you can begin the process of reducing the wasteful spending and debt so that you have more money left over to spend on the things you enjoy doing.

When you create and stick to a budget, you get a true understanding of your current financial situation. If you don’t take in enough to cover all your monthly expenses, then you can find ways to bring in extra money before you have late fees and end up with a poor credit score. It also lets you stay on top of your expenses so that you only take on debt that you can afford.