Why is Budgeting Essential? 6 Reasons You Need a Budget

Are you curious about where your paychecks are going? Do you know how much you are spending every month? If you do not know the answer to these questions means you do not have a budget. It can be frustrating when you have no clue where your money is going.

 
A budget is an estimation of revenue and expense over a specified future period of time and is usually compiled and re-evaluated periodically. Budgets can be made for a person, a family, a group of people, a business, or about anything else that makes and spends money.
 
Budgeting might sound lame; however, this is an essential step to building wealth. Making a budget is the most important thing you can do to manage your money. You may probably associate budgeting with restrictions and a lot of hassle and headaches. However, budgeting is essential because it is a way for someone to stay organized with their money. Most wealthy people became wealthy because they have a budget they stick to. That is how they stay on top of their money.
 
I always have a budget for how much I can spend each month. Without a budget, I cannot keep track of my spending. This can lead to overspending and mishandle my money. Moreover, I will not build the wealth I have right now if it was not for budgeting. If you are one of those who never do a budget before, I will explain why budgeting is essential. Budgeting is a crucial step for someone who wants to build wealth, and it is something not to be ignored.
 
1. A Budget Helps You Figure Out How Much You are Making.
Do you know how much money you bring home each month? What about each year? I am not talking about your total salary, but how much you come home with after taxes, benefits, and retirement savings.

Well, the first part of budgeting is to track what you earn. This is an important step in managing your money well. Since working in my dad’s company, my dad always pays my salary first of every month. I always calculate how much I am earning every month. This is so that I can know how much money I have coming into me. By knowing the income you are receiving each month, you can know how much you can spend or save.

 
2. A Budget helps you Understand Where Your Money is going.
Having a budget helps you understand what you are spending every month. This is really important because you need to know what you are spending your money on. By keeping track of your spending, you can then avoid going into debt and have money to be saved and invested.
 
Tracking your spending can be as simple as using an excel spreadsheet, writing down and adding up your receipts each month, or using a budgeting app or software. When I receive my monthly paycheck, I always put aside 40% of my income to be invested in my stock portfolio. With the remaining 60% of my paycheck, I set a budget for spending. I always make sure that I have enough for my necessity for a month period.

 
3. A Budget helps You Gain Control over Your Money.
Budgeting is an essential tool that can help you feel good about your finances. It will help you feel in control when used properly. With budgeting, you control your money and not your money controlling you.

Budgeting saves you the stress of suddenly adjusting to a lack of funds because you did not initially plan how to spend. It also helps you decide if you want to sacrifice short term spending like buying coffee every day in exchange for a long term benefit like a cruise vacation.
 
With budgeting, you are clear on what money is coming in, how fast it goes out, and where it will. Budgeting saves you from wondering every end of the month where your money went. I always keep track of my budget. I feel by doing a budget, I am in control of my finances. Without a proper budget, I will not be able to save money to have it invested. Trust me; you need to be in control of your money. If you want to be wealthy, you need to start with a simple thing like budgeting. 

 
4. A Budget can Help You Get Out of Debt.
If you are in debt, a budget can help you get out of debt. It would be best if you spent less than you make and put the excess towards the debt.
 
This might sound easy; however, many people are trapped in the debt cycle because they do not have a proper budget. Without of proper budget, you will always use your credit card for a solution. This will keep you from getting out of debt. I mean, think about it, how can you get out of debt if you are always using your credit card.
 
I have never acquired debt in my life. I believe that having a proper budget had led me to stay away from getting into debt. Imagine if I do not have a proper budget, I probably overspend my money. This can cause me to get into debt to finance my expenses. I managed never to acquire debt in my life because I always monitor my spending. Having a budget enables me to know what I can spend on.

 
5. A Budget Helps You to set Financial Goals.
Budgets help you achieve the life you want to live. Setting money goals through budgeting will help you get there. If you have been disciplined in following your budget, you probably have partially managed to invest your money. When you have a budget, you will have extra money to be invested.
 
You can avoid spending unnecessarily on items and services that do not contribute to attaining your financial goals. If you are working with limited resources, budgeting makes it easier to make ends meet.
I always stick with my budget, which has led me to set financial goals in my life. I would not be able to set financial goals if I was not disciplined, following my budget and consistent investing. Without a budget, I will not have the spare money to be invested each month.
 
Even though the wage I receive from my dad is not much, I was still able to create wealth through a proper monthly budget. Budgeting is the prime reason why I can be a millionaire today. I’m always consistent in following my budget, which led me to invest and create wealth.
 
Usually, every time I receive a paycheck during the beginning of each month, I always set aside 40% of it to be invested. I will then budget the rest of 60% for a month period. I always make sure that I do not overspend and making sure I have enough for the rest of the month. I believe if you set a budget for yourself, you can attain the financial goal you want in life.
 
Millionaire became wealthy because they are consistent with staying on top of their personal finance. They did not become wealthy accidentally. It’s because they are always consistent with their budget and slowly build their wealth up.

 
6. A Budget Helps You to Reduce stress.
Can you imagine a life where you do not have to worry about money issues? However, the real world is not like this. Many people are constantly stressed about money. The reason for this is because they are not organized with managing their finances.
 
I believe a proper budget can help you reduce stress. I am saying this because I go through this as well. Budgeting saves me the stress of suddenly adjusting to a lack of funds because I did not initially plan how to spend.
 
I feel by sticking to my budget; I was able to have no stress regarding money issues. I like to stay on top of my personal finance. I’m always disciplined in monitoring what I’m spending on. It became a habit for me always to manage my personal finance properly.

Bottom Line
Budgeting is having a plan for your money. Your money is a tool, and you get to use it to improve your life. Having a budget helps you live the life you want. You must have a budget of your own. This is the basic step to managing your personal finance. Through budgeting, you can have control of your money. You can decide how much you will invest and how much you are going to spend.
 
I am able to become the millionaire I am today because I always stick to my budget. I make sure that I do not spend more than I was supposed to and always to be consistent investing partial of my income. I believe for a person to become wealthy, they must have a budget. This is the first step to take control of your money. Having a budget in place will help you move closer toward living the life you’ve always dreamed of living.
 
I hope by reading this article, you readers will understand how budgeting is essential to building wealth. So if you are looking to attain financial freedom, start with the basics like budgeting.