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Everyone wants to be financially fit. People dream of being debt-free, having a healthy retirement fund, and having money leftover for nice vacations. There is nothing glamorous about financial planning and budgeting.
But making a budget plan and then sticking to it, is the challenge. Living on a budget is not something that comes easily, and we often make it harder for ourselves than it has to be.
Why Budgeting Is Important
The importance of budgeting is not an overstatement. Making a budget plan then tracking personal expenses is a financial planning process that puts you in control of your money. Here are some reasons why budgeting is important:
The Basic of Financial Planning and Budgeting
When we go grocery shopping, it’s common to leave spending more money than we intended when we don’t have a list. Then we forget to purchase things that we needed for the week. Having a budget is similar to the grocery list, telling us how much we can spend on gas, groceries, dining out, etc. It also ensures that we have enough money to pay bills or put away for an emergency fund.
The basics of financial planning and budgeting are you have to spend less than you earn. It would be best if you remembered your budgeting purpose each time you want to spend the money. Living on a budget is the most important thing here.
Can Help You Get Out of Debt
If you want to lower the amount of debt you have, budgeting is one of the best tools you can use to achieve that goal. During the financial planning process, you will know how much money you’re spending each month towards your other expenses and be able to decide how much you can plow towards getting out of debt faster.
Shows You Where Your Spending Too Much
If you spent a week following your budget, you would likely find some surprises. The $30 a week that you were setting aside for lunches has turned into almost double when you add up those Chipotle burritos. By being able to identify these expensive expenditures, we can adjust our habits accordingly.
If you want to be strict with your budgeting plan, there are rules of engagement. Stay on track with your budgeting purpose with these budgeting 101 points:
- Set aside an automatic transfer to your savings every time you receive a paycheck
- Please give yourself a weekly allowance that you can spend however you want, until it replenishes the next week
- Get into meal prepping and shop once a week. Food and eating out are huge expenses that can quickly get out of hand
- Set financial goals to remind you what you are working towards
- Have the occasional splurge
- Use a personal finance app to help you manage your budget
- Get yourself time to get into a rhythm with budgeting. It takes three to four months before most people get it right
- Don’t compare your situation with others. Your job is to do what’s right for your family financially
Budgeting Tips to Consider
Remember to treat budgeting like any other skill or habit that you’re trying to learn. It’s going to take time and effort to get it down and stick to it. Here are some budgeting tips that you might find useful as you learn how to live on a budget.
Try Using Cash to Control Spending
It’s really easy to use a credit or debit card to buy things in seconds. It is also easier to lose track of how much we’re spending. Use cash instead to pay for purchases. It is much easier to visualize how much you’re spending since it’s real money. It might even get you to reconsider buying that $7 latte and going for the $4 espresso instead.
Practice Money Mindfulness
Money brings a lot of stress to people’s daily lives. Money mindfulness is the act of being present with your money. You’re not actually doing anything different. It’s about noticing the decisions that you and your feelings about your choices. Here are some questions to ask yourself:
- What is my definition of financial success?
- If I achieved financial success, what does my life look like?
- If there is one thing I can do this week to move in that direction, what would that be?
Make Adjustments When You Need To
A budget doesn’t have to set in stone. You are in charge of your budget and money. If you realized that you made an unrealistic expectation about how much a bill is, adjust it and move on. Start tracking personal expenses will make you more aware of your spending habits. It’s not a sign of failure if you spent more than planned because the overarching goal is to spend less than you earn.