To run a successful business, companies go through a lot of planning to define their budget and how to spend it. Financial and strategy managers get assigned to this exercise.
In the business of life, you are your own financial and strategy advisor (unless you hire professional help). Just as when running a business, in life, you also need to take budget planning and budget management seriously and make the time for it.
Being in control of your money allows you to make the best use of it. It requires some sacrifice and discipline because it won’t be handed on a golden platter. In fact, one of the most helpful changes you could make is creating and managing a realistic budget.
What is a budget?
A budget is an estimation of money coming and money going out during a specific period. When we talk about budgeting for personal finances, we usually focus on one month as the typical period. A budget helps you manage your monthly expenses, prepare for emergencies, focus on your future and big events in your life without going into debt.
Budget management doesn’t require you to be good at math. It also doesn’t mean you can’t buy what you want or is about spending as little money as possible and feeling guilty about every purchase.
Finally, budgeting shouldn’t be a burden. It’s not that difficult to manage and it’s simply a matter of getting in the habit of it so you know where your money is going. There are plenty of budgeting planners that can help you with the process.
Some might say, but how do you work off a budget when there is none? If you earn a salary, then that’s your budget. Living by your means is what you will need to focus on as you start budgeting.
In essence, budgeting is about having a sensible, tangible plan on how to work with the amount of money you have as opposed to “winging it” and hoping for the best. Savings, investments and tackling debt are essential parts of your budget as well, even if you are debt-free now or become debt-free one day.
What are the benefits of budgeting?
#1. Organised finances
Without a budget, your finances will become messy leaving you with the problem of incurring further debt which can be detrimental. Your budget should be planned according to how much you earn and need to spend each month. This will give you a strategic idea of how to allocate your money for expenses and personal enjoyment based on financial limitations.
#2. Enjoying life guilt-free
A budget is not designed to restrict you from enjoying life but rather to ensure that you manage your finances effectively and enjoy its perks without feeling guilty about every spending spree because you already plan for it.
#3. Better focus on your goals
Keeping to a fixed monthly budget will also help you stay focused on important short- and long-term goals. It will keep you more aware of what is going on with your money each month and assist you with organising and properly allocating funds to cover monthly costs.
#4. Helps with emergencies
Budgeting also enables you to save for unexpected emergencies and helps you tackle debt better by identifying where you can eliminate unnecessary expenditures.
#5. Enables the big stuff
It also helps you plan for the big purchases and events in your life such as a house, a car, a wedding etc. This will allow you to maximise your savings or investments each month as you have a strategy in place for the things you want and the things you will need even if they’re not immediate. Thinking about this and putting specific action now will give you piece of mind so that when one day you need the money to cover for these big expenses or emergencies, you already have it.
Achieving financial freedom, independence or better money control may seem like an insurmountable task. The best way to start is to look at the easiest, least restrictive ways of creating a better management system for your personal finances. This is why looking at budgeting is the first practical step to mastering money.
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