Do you know how much you earn and spend every month? How much is left to invest and save for a comfortable future? Most people don’t, and I can understand why: budgeting is pretty boring. But it is essential if you want to make sure you are living within your means and spending less than you earn.
Getting started with budgeting has been made easy thanks to simple online budget calculators. They do most of the heavy lifting for you. For example, they are here to remind you that your income is not only your salary from your day job, but also your benefits, income you may be receiving from investment, child support, and more. Forgetting about your income is not as great as you may think. If you actually earn more than you think you do, and still can’t make ends meet, that means you are living on way more than you think.
The same goes for your monthly expenses. Sometimes, you think you’re only spending money on rent, food, utilities and transportation. But if you take a notepad with you for a week, and really write down every single expense, you might be surprised. These are the little things that keep your budget close to zero, or even in the red. The advantage of budgeting is that you are fully aware of where every penny goes. So the next time you open up your wallet, you can ask yourself, “do I really need that?”.
Not that budgeting is meant to deprive you, like a crash diet. On the contrary. It is meant to help you find more breathing room so you can spend money on things that actually matter to you. When you budget properly and free up a couple of hundred every month, that is money you can deliberately choose to put into travel, going out with your family, a special treat like a spa day, and most importantly, investing in your future.
Budgeting will help you determine how much you can comfortably allocate every month to your short term savings (to pay for a holiday or Christmas gifts), mid term savings (to replace your car or the heater in your home) and long term savings (to finance your kids’ education or pay for retirement). And by crunching the numbers, you will be prepared to adjust and able to sleep soundly knowing everything will be taken care of in due time.
Money is often a cause of stress in the household, and streamlining your finances is the best way to avoid tensions. You can use your budget to give everyone in the household a “fun money” allowance, to do what they please. You can explain to your kids that there is only a finite amount of money when they ask you to buy them something on a whim. If you are unprepared to face money decisions on the other hand, you may make the wrong choice and regret it later.
What time you invest budgeting every week or month is actually saving you time down the line when you have to go through receipts and don’t remember how you got there. So try to get a moment regularly to check your budget and keep your finances in track.