Budgeting is one of the basic skills any person should master. Most people with good financial standing are doing well effortlessly not because they earn more but because they budget really well. The same goes for people who are bad with it. They usually take budgeting for granted and end up putting themselves in a hole they hardly can get out of. There are many tested budgeting methods you can try. Sound budgeting is one. Defined as an estimate, often itemized, of expected income and expenses for a given period in the future. This is widely practiced by government offices and business establishments but should also work for personal use. In this blog, let me share with you the 5 reasons why you need a sound budget.
—Helps You Allot More On Savings
Savings is always on top of my list and what’s left of my budget is allotted to daily spending and other things. I save for emergencies, travel, future investments, and sudden unemployment. Of course, this may not apply to people who are still trying to pay off debts as bringing what you owe to zero should come first but this doesn’t mean not putting anything on savings. There are many ways you can approach sound budgeting and it depends on what you deem more important in your situation. Knowing how much you make and how much money you would have for a given period helps you with putting more on your savings while paying off debts and taking care of your necessities.
—Prevents You From Ending Up in Debts
Most people end up in debt because they spend more than what they make deliberately. Admit it or not but most of us already have a ton of things in mind we want to spend our money on even before seeing our paycheck. This often leaves us having to borrow money to pay rent and buy food in the end. A sound budget prevents just that from happening. When you make a safe estimate of how much you would have come to the next payday, it allows you to picture your current financial situation which can lead to better choices when it comes to handling your finances. Things like putting off booking a plane ticket or buying a new pair of shoes for later to add on your emergency funds or catch up on your credit cards.
One thing to bear in mind though is that sound budgeting is just the start. Sticking to it is what makes the most difference. I usually have an excel file of my projected budget for a 6-month period that gives me a rough estimate as to when I will have funds for non-essentials. You can read many resources online if you wish to learn more about budgeting and how you can make it work and use it to your benefit.
—Keeps You Away From Unnecessary Spending
Notice how your small spendings like that daily cup of Starbucks coffee or thrice a week Chinese takeaway can surprisingly become big when summed up? We are often fooled into buying stuff we don’t actually need just because they are cheap. Our random Amazon or Shopee finds may seem like a good bargain at first but when our budget falls short and our credit card bill shoots up, we would realize they’re no cheap finds at all. Having a sound budget stops you from getting into this kind of trouble as you will have a clear understanding of how much cash or credit you have left after all the necessities. This prevents you from impulsive buying and encourages you to spend within your means.
—Gives You Peace Of Mind & Control Over Your Finances
We don’t realize it but what stresses us out the most is money especially the lack of it. I would often come across posts on Facebook of some friends stressing over people who are hard to pay back the money that they owe. Worse, it would sometimes cause them years of friendship. Sound budgeting keeps you from being in such a situation and makes you one step closer to having control over your finances. Being aware of your cash flow, keeping debts in check, and having a grasp of where you stand financially allow responsible choices which would often lead to a peaceful mind, better sleep, and less stress.
—Opens Investment Opportunities
This is probably one of the best reasons why you should have a sound budget. When you’re in control of your finances, you tend to have more courage to look for investment opportunities, or at least you’re open to it. Besides, you most likely have the funds to put into it may it be long or short term. I, personally, go for mutual fund investments with medium risk and return. I’d say, I’m not yet in a position where I can easily go for high-risk investments with bigger returns but I’m getting there. So depending on where you stand financially or where you’re at with your sound budget, investing your spare cash is never a bad idea.
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There you have it, lovelies. I hope this post encourages you to assess your finances and look into having a sound budget. There are many useful resources online that would help you get started. Don’t forget to share this with your friends. Until next time. Ciao!
