Have you ever wanted predictability and control over your money? So you can finally buy that new phone or a new laptop that you want? Then you are in the right place because we have the answer for reaching your financial goals – budgeting.
Don’t leave us yet! You might think we would tell you about anything that wouldn’t involve consistency and planning, eventually is 2022: “Do we still have to budget our money?”. Unfortunately, there are no shortcuts for creating more predictability.
First, let’s understand what budget is and how it works. Shortly, a personal budget is a tool or a mechanism that helps us to manage our own money. It shows us where our money comes from and where it goes (income and expenses), this is called cash flow. We can choose to have a budget in several forms, it can be written in a journal, you can do it in Excel or using interesting apps. The important thing is to have one.
Why? Here are some reasons for starting budgeting …
1. The budget will give you a screenshot of your income
The personal budget gives us a real image of our financial situation. Many people say they don’t need a written budget, they have all the numbers in their mind. That might be so, but just thinking about your financial situation without analyzing it and visualizing it, will result in wasting more money and you’ll have the illusion that you are richer than you are. By keeping a budget, you will get a better understanding of where your money is going. Nowadays online banking uses charts to show you how you spend money, they even allow you to categorize your expenses and set a budget.
2. It gives you insight for decisions making
Another reason why it is worth having a budget is that you will learn how to improve managing your money. A well-made budget highlights where you are misusing money so you can redirect it, to save it for later or you can invest it. Based on numbers and analytics you can make money decisions faster and more efficient.
"If you can't measure it, you can't manage it."
Peter Drucker
3. It helps you face the unexpected
Murphy’s law said that “Anything that can go wrong will go wrong.” It’s a popular saying and was validated also by Finagle’s law who added “—at the worst possible moment.” Still, Finagle’s law is known as Murphy’s law and the effects are seen in our lives. The theory couldn’t be more realistic: how many times does the car break down exactly when you have no money left?
Therefore, budgeting gives safety. A difficult word to understand in these troubled days of the pandemic. Life sometimes takes us by surprise (and that can be in a bad or good way either) and we must be prepared. If we have money set aside for emergencies and unexpected situations, we will feel safer, and we would live in peace with Murphy, somehow at least.
4. Budgeting will improve your overall wellbeing
Keeping track of expenses and creating more predictability helps people “feel more in control”, “feel more confident”, and “feel more secure”, according to a survey made by Certified Financial Planner Board. Even if it takes time, effort, and regular action to live on a budget the payoff is worth it because it involves our health too. There are many external factors of stress for us, let’s not add personal finances to the list.
5. It encourages you to adopt a long-term thinking
We all have many wishes, not only needs, and not being able to buy something that you want can be very frustrating. If you don’t have money for it now, a budget can help you see where you can cut back on expenses and set aside for the desired thing. With a spending plan, you’ll see progress in gathering the desired amount each month. You will learn to save better and to invest.
Before you leave
Financial security does not come from high income or ignorance, but it comes from the correct management of money. Don’t let the intention of starting a budget be only a new year resolution in 2022 and start building security and predictability.
