Part 1 in my New Series on Budgeting
Are you like me and when you here the word, "budget," you think, "Uhhh, I can never stick to it!"?
Seriously, I'm past 40 and have yet to successfully stick to a budget for any length of time. What I usually end up doing is just recording my transactions in a register, assigning them to a category, but never truly sticking to only spending so much per category. And I've tried off and on for years.
So, here I am, once again attempting to succeed at budgeting. What makes this time any different than the others? A couple of things: I have a defined goal that I'm working towards and I have the accountability of an audience.
If we're going to make a successful budget that we stick to, the first thing to look at is why—why do we need to budget?
In this post, I'm going to give you 5 reasons why it's important to start budgeting today.
1 - It helps you understand how you spend your money and identify bad habits.
2 - It helps you prepare for emergencies.
3 - It helps you prepare for retirement.
4 - It helps you to not overspend.
5 - It helps you identify your money goals, map out a plan, and keep track of your progress.
I could probably keep going and come up with at least 5 more, but I think these are the most important.
#1: It Helps You Understand How You Spend Your Money & Identify Bad Habits
You may think you only spend $250 a month eating out, but surprise...it's actually $500. Or remember that software free trial you signed up for 6 months ago? Well you forgot to cancel it and have been paying $14.95 a month for something you only used once. Or what about all those streaming services? Do you actually watch them? Or is it something you could sign-up to receive for free through your cell phone carrier (Verizon, anyone?) and save yourself that monthly fee.
Once you have a budget and keep track of where your money goes, you'll be more aware of the hidden (or not so hidden) things that slowly drain your bank account like a vampire sucking blood.
#2: It Helps You Prepare For Emergencies
Part of your budget should always include funding an emergency fund. Whether you're saving your first $1,000 as part of Dave Ramsey's 7 Baby Steps or you're working on saving 3-6 months worth of living expenses, an emergency fund is a must.
Emergencies are inevitable. It's a matter of when, not if they will happen. Job loss, illness, car repair—any of these can happen at any time and it pays (literally) to be prepared. When you're trying to get out of debt, the last thing you need is something happening that causes you to fall right back to where you were.
#3: It Helps You to Prepare For Retirement
By having a budget and planning for regular contributions to a 401(k) or other type of retirement fund, you can have peace of mind that you'll be financially secure once you hit retirement age.
#4: It Helps You to Not Overspend
So many of us have a credit card for "emergencies," but it's so easy to use it to pay for things we can't or don't want to use our paycheck for: that fancy meal out for a birthday (<— me), those jeans that are 50% off for Black Friday (<— also me), or that plane ticket to go home for Christmas (<— again, me).
Before you know it, you've racked up the national average (or more) of credit card debt, $6,194 (in 2020).
If you have a budget—and stick to it—you can plan for those events and pay cash, living within your means and achieving your goals.
#5: It Helps You to Identify Your Money Goals, Map Out a Plan, & Keep Track of Your Progress
Speaking of goals, having a budget will help you prioritize your spending by identifying where you want to go, what you want to do, and how you plan to get there.
This is the most important reason for me. I want to travel full-time in an RV. But to do that, I have to pay off debt, buy a truck and camper, and have an emergency fund. They way I'm currently living, paycheck to paycheck, it will never happen if I don't start saving and stop spending.
As you can see, I have a long ways to go: I've got to learn new habits and stick to them, start practicing some self-denial, and stop expecting instant gratification. Wow! But, I'm 100% confident it can be done.
There are so many other things to consider when budgeting and I have blog posts coming out in the next few weeks that deal with each of these points. Be sure and sign up for my mailing list so you don't miss a new post!
Do you struggle with budgeting? Let me know your pain points in the comments below!