Budgeting is the foundation of financial fitness. Are you budgeting? Do you want specifics on why you should be budgeting if you aren’t? Here are seven reasons why budgeting is awesome and you’ll be happy once you get started.
Down below the seven reasons is a way for you to download free budgeting spreadsheets. These spreadsheets are pre-populated with some categories for you, and they’ll also total everything up to help simplify the process.
1. Budgeting helps you align your priorities
Budgeting is quite literally an exercise in prioritization. Budgets don’t limit people from spending. If there is a limitation at all it would be the amount of income or current money someone has in their accounts.
What budgeting does is allows you to align your spending with your priorities. If a weekly date night is a priority then it should be in the budget! If going to the movies a couple of times per year is a priority, then it should be in the budget!
Now, you can only allocate money that you have (or you’ll go into debt), so this is where prioritization comes in. Once all of your money is allocated, if you want to spend more in one category you’ll need to spend less in another.
When you have a budget you can define these priorities and allocate amounts in advance – to make sure your spending is in line with what is important to you.
2. Budgeting helps you stop overspending
Once you have your priorities defined, you are better able to avoid over-spending.
When you are standing in a store considering a purchase you can refer back to the budget. Is there enough in the budget? No? Well then is there another area which is a lower priority than this purchase? If so, make the budget change. But if not – if your other personal categories are a higher priority than the considered purchase – then you can avoid an over-spending mistake.
When you know in advance how much money you want to allocate to certain things, you can make decisions in real-time. Far too often people who don’t budget just look at their credit card statements at the end of the month. It’s at that point they realize they spent too much.
3. Budgeting puts you in control
When the average person looks at the bank or credit card statement at the end of the month, they usually wonder “where did the money go?” Sure, you can dig out the details from those statements but wouldn’t it be better to tell your money where to go, instead of wondering where it went?
Active budgeters direct their money to the things they previously decided are important.
Using a budget puts you in control of your money. It assures you have enough money for the things in life that are a priority for you. No more hoping you have enough to pay for something – control the money to assure you do!
4. Budgeting helps you achieve your goals
Prioritization isn’t just for the immediate future. Quite often events in the short term will impact the likelihood of events working out well over the long term.
Let’s consider retirement. A comfortable retirement is an important priority for most people. Yet the average American doesn’t have a plan to assure the retirement they desire.
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Budgeting helps you achieve your future financial goals. Within your budget, you can allocate a certain amount of money each month to make sure it is set aside for a specific goal. Some common goals are saving for a new car in the future, or paying for a child’s college education, or being able to afford a nice wedding, and of course the most popular is a comfortable retirement.
5. Budgeting is liberating!
Have you ever thought “I wonder if I can afford to <insert the expense of your choice>?”
Non-budgeters think this all the time. People who budget know they have money allocated to certain areas. When it is time to purchase clothes, all they need to do is confirm the remaining budget amount – then go shopping! It’s liberating to know that you can spend without regret or causing financial problems… just as long as the money is in the budget.
My wife will tell you she feels much more financial freedom since we started budgeting. There are no longer discussions before every purchase. Categories are already set with assigned amounts. If we’ve budgeted for it, there doesn’t need to be a discussion.
Rather than being restrictive like some people fear, budgeting actually provides the freedom to spend! And to spend without anxiety.
6. Budgeting allows you to stop worrying
Once you have a plan, and a budget that reflects the priorities of that plan, a lot of worries disappear.
You don’t need to be worried about having enough for a down payment on the house – because you are budgeting and saving for it. You don’t need to worry about coming up short on paying the bills when they arrive – because you’ve planned to cover them in advance.
A study in 2016 showed that 67% of American adults experienced financial anxiety that was impacting their health. That’s a huge problem – and budgeting can solve it!
7. Budgeting prevents money fights
With the freedom and liberation of budgeting, fights over money issues become a thing of the past.
Once your family has agreed on priorities, future goals, and financial allocations to each important category, there are fewer disagreements over finances. You have a plan so there is no reason to fight about it.
Finances are the leading cause of stress in a relationship. A 2015 study concluded that, of couples who get divorced, 57% of them claimed that financial topics were the major contributing factor.
If you aren’t budgeting, get started now
Making and following a budget is easier than many people think. You can download some free budgeting forms below to help get started. As financial planners, we’re also available to help people work through topics like budgeting… and investments, insurance, retirement, work benefits, and more. You don’t need to go through this alone. Just reach out to us if you want to talk about how we might be able to help.
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