There are many finance experts that are always saying that we should budget. It can seem rather boring though and so is it as important as they make out and does it have to be done all of the time?
Budgeting is really important when you are tight for money. If you almost spend everything that you earn each month, then it is really important to make sure that you budget carefully so that you do not accidently overspend. You also need to make sure that, even if you are in control, you need to make sure that if things change a bit, you do not suddenly find that you are out of control with things. If you spend more than you earn then it is even more important that you budget to make sure that this does not happen all of the time.
Keeping a strict record of your finances is a good exercise to do to start with. Note down the money you have coming in to the household and the money the regularly goes out. Include larger payments that do not go out regularly as well as you will have a good idea of your current situation. You can use bank statements to help you with this and although you will not know exactly where all money was spent; particularly things bought with cash, you will still have a rough idea. This will help you to start to get an understanding of how you manage money month to month and will explain why you either have savings or why you struggle each month.
Whether you are struggling or not, it is a wise thing to do because it will allow you to understand where you stand with regards to your finances. If you have any goals, perhaps with regards to repaying debts or saving up money, you will be able to see where you currently are and what you need to do in order to achieve your goals. It need not take that long either, it does not have to be completely accurate, just a rough guide, particularly if you are managing well. If you are struggling then every penny may count.
Setting a budget can feel very restricting. You may feel that it means that there will be no fun and that you will only be able to spend money on necessities but that is not what it is about at all. It is about making sure that you are spending money on things that are important to you, Being more aware of where your money is going and making sure that you prioritise your spending so that you can reach your goals will actually be very helpful and does not mean there will be nothing left for treats, if you want some left, you can just budget it in. However, if you set a treat budget each month, it means that you will be more in control and less likely to spend more money than you can afford to. You can always carry some over to the next month if you want something more expensive.
Having a budget is a great way to feel in control of your finances. Knowing where all of your income is going can be extremely useful and you will easily know whether you can afford to buy certain things or whether you will need to wait until you next get paid or until you have saved up. It can be really easy to overspend whenever we are shopping as there are so many tempting things to choose from in the shops that keeping to a budget can help us to avoid buying too many things that we do not need. It can be extremely useful to help you to manage your spending, particularly if you find this difficult. You will also become more aware of how much things cost and it may mean that you will reduce your spending by choosing cheaper alternatives just because you are suddenly aware of how much certain things are. You may choose to try cheaper brands or cheaper shops and find that you can save a significant amount of money without even really trying.
Whether you have a large or small income, are spending lots of money or just a little and whether you are struggling to make ends meet or finding it easy, budgeting can be really important. You will be able to make sure that you are in control of your spending, saving and borrowing and know exactly where the money is all going.