You might have studied budgeting in college, at school or at home. You may also be hearing about how you need to maintain a budget so you can save, spend, plan and protect your money. Why is a budget so important for your money though? What role does this word play in your financial life? This article brings all these answers to you in the most simplified manner.
Meaning of Budget
A budget is a comprehensive plan that aligns your spending with your goals, income, and expenses. It is a forecast of what money you make and how much you spend during a particular time. If you are maintaining financial records for your entire family, it is called a family budget.
Budgeting can be done in various ways. People can either focus on sundry expenses or specific categories. Some people prefer to do this record keeping manually while others use a spreadsheet or budgeting applications. The 50/20/30 budget technique is a great way to manage your money. It means that you have to spend 50% of your monthly after-tax income on necessities, 30% on things you want, and 20% on savings.
What purpose does a budget serve?
Budgeting means using money effectively. Making a budget is not a hassle but a plan to give you more control over your money. The budget can be adaptable to your situation and evolve as you move through different stages of life.
Importance of budgeting
Budgeting is important for every person. It motivates a person to save more and put their money to the best use possible. Here is why it plays an essential role in your life.
- Reduces tension
Budgeting helps in making financial decisions more easily and reduces the burden. This reduces stress and brings relaxation in life.
- Manage debt
Preparing a budget helps to stay ahead of debts and reduce overspending on miscellaneous desires.
- Have a worry-free future
A good budget pushes you to save for emergencies, and stay relieved in case of any uncertainties.
- Understand how to manage money
Maintaining a budget helps you to understand how much you need to save, and spend on things. It helps you come to terms with how much you need to spend, and if you are doing it in excess or deficit.
Where to start?
Have you also made up your mind about being financially responsible? It’s easy to start, all you have to do is create a spreadsheet or book where you will outline your income, mention debt & other balance, and your expenses. That’s it, you are good to go!
