The Importance Of Budgeting

1. Have set goals and objectives you wish to achieve

A budget can help you determine short and long-term goals and put you on the path of working towards them. Having a criteria of how to allocate your spending will ensure you can live within your means and work towards the purchase of those items such as a new car, a deposit on a house or even a family holiday.

2. Ensure you don’t spend money you don’t have

Discretionary spending is one area where consumers spend more money than they have – we seem to owe it all on credit cards. We are spending on credit rather than using saved funds to cover our lifestyles.

3. Ensure you are happy in retirement

The importance of contributing a portion of your funds from your budget to investments will become more evident in later years. Setting aside a set portion of your income in your budget to be used for retirement and investment purposes will help you build your wealth.

4. It helps to be prepared for emergencies

You can never really know when the unexpected will occur, as life is filled with surprises, some good and some bad. Having an emergency fund helps you have peace of mind knowing you have funds available should the need arise. For most of us this would be between three to six months’ worth of living expenses – this is something to also build into your budget. It doesn’t need to happen overnight rather, it can be built up over time.

5. Budgeting will help address bad spending habits

Building a budget forces you to take control of your spending habits. This may help you to notice certain items or areas you are spending more than necessary on. Often asking yourself the question whether this is a necessity will help you determine its cost/benefit to you. This will assist you to rethink the way you spend money and re-focus your financial goals and objectives moving forward.