Budgeting is one of the most powerful tools for managing your money. However, many people avoid it because they believe it takes too “much extra time.” In reality, it is quite simple. Once you make a habit of it, you will begin to take Control of Your Money, instead of Your Money Controlling You.
What is budgeting?
A budget is an estimate, often itemized, of expected income and expenses for a given period in the future. (via dictionary.com)
Here are a few of the most common methods used for budgeting income the 60% solution, the balanced money formula, cash-only budgeting, zero-based budget, and more.
The 60% Solution – 60% of income on “committed expenses,” 40% into 4 categories at 10% each (Retirement, Long-term Savings, Short-term Savings, & Fun Money)
Balanced Money Formula – 50% on needs, 20% to savings, 30% on wants
Zero-Based Budget – Here, you are spending all of your money, each dollar has a job. A portion goes to savings, retirement, and investing. Another portion goes to necessary expenses and the other to frivolous spending. You zero-out your allotted amount for each of those categories each month.
Cash-Only Budgeting – Take out cash and put in envelopes labeled for where it goes (expenses, fun, savings, investment, retirement, etc.)
The link below will give you more information on these methods
https://www.atypicalfinance.com/7-best-budgeting-methods/
Essentially any type of monthly budgeting will allow you to visually see your financial limitations and help save you the stress associated with overspending and debt.
If you are not yet convinced, here are our Top 5 Reasons to Budget Your Income:
Take Control of Your Finances, Before They Control You
Think about it like this; If you do not know your financial ceiling what is to stop you from overstepping and going beyond your means. This downward spiral is how you end up with debt you cannot control and feelings of overwhelming stress about affording everyday necessities in the future.
Budgeting is a simple tool that allows you to keep a close watch on your monthly expense and visually show you where daily small expenditures are adding up. And give you the chance to make a CHANGE, if the path you’re on does not match your financial goals.
Improve Your Mental Health & Decrease Stress
According to CNBC, money is the #1 cause of stress for adults today. Why not set yourself apart from the masses by decreasing your stress and improving your overall mental health by setting up a monthly budget.
Knowing you have money to spend on the things you want to do and understanding where the rest of your income is going puts you into “Financial Contentment.” Financial contentment is a fundamental element of “good” money habits/behavior that promotes peace of mind. When you are satisfied with your financial position you are less likely to spend money you don’t have, envy others, get embarrassed to discuss money, or fight with your spouse/significant other.
Each time you adjust your budget or make changes to your spending habits, you are choosing to focus on you.
Your Goals. Your Decisions. Your Money. Your Life.
And that is how it should be.
Helps You Save!
One of the most evident reasons to budget your income is to save money. For some, saving is quite an easy task but for others, it may seem daunting. Creating a monthly budget allows you to get rid of unnecessary expenses, allocate your money to fit your lifestyle, focus on paying down your debt, and it helps you avoid making purchases you cannot afford. All of these combined allow you to plan ahead and truly start saving.
Why is it important to have emergency savings, investments, and retirement plans?
Many adults today live paycheck to paycheck and do not have enough money saved up to pay their bills for even one month if income is cut off. This means, no emergency savings for unexpected obstacles like a blown-out tire, medical bills, a flooded house, or being laid off from work. Think about it…
Anything can happen; Like the pandemic, for example, it is always better prepared for something that doesn’t come than to be flustered when a hurricane knocks your door down.
Having a “safety net” of money put away will not ONLY put your mind at ease, but give you the freedom to make a sudden career change, help with your child’s schooling/college, and successfully handle unforeseen expenses without furthering your debt. Unless your one of those people who see themselves working full-time until the day they die, you will want to put money away for the retirement you have always imagined.
Reach Financial Goals
In a society where neat to nothing is free, budgeting your income becomes an even more crucial skill. If you dream of buying your first house, traveling to a country you have never been to, creating your own business, or starting a family you should be reading more carefully into the article. These are all perfect examples of life milestones we have all thought about at one point or another. Even if you are already living some of those dreams, you know that all of the above requires “CASH money.”
A budget is a simple way to reach your financial goals and turn around your debt, so don’t wait and ask for advice from Small Business Accounting today!
We want you to Live Your Best Life
Budgeting your income can make an incredible impact on your lifestyle and mental health. Plus, with all of the finance apps available, financial advice from a company like us (Small Business Accounting), and the internet creating a budget has never been so accessible. The benefits, as seen above, are well worth YOUR TIME and EFFORT.
Budget → See Where Your Money Goes → Make Changes (if necessary)
→
LIVE YOUR BEST LIFE, with Financial Freedom!
We have personally witnessed how mastering finances changes peoples’ lives for the better. And we would love for you to be the next success story. Call or email us at christy@lookatmybooks.com or 434-239-1989 and never be bogged down by debt again and LIVE stress-free.