Why Is Budgeting Important? 12 Best Reasons to Start Budgeting Today!

Budgeting nerds never have to ask “why is budgeting important?” Their love of numbers and spreadsheets is enough to keep them warm at night.

But most of us don’t love budgeting. For us, budgeting is like sitting down and counting all the ways you’re going to deprive yourself.

When you think of it like that, it’s not hard to see why people avoid budgets! But luckily, that’s not what budgeting is!

In the simplest terms, a budget is an estimate of your income and expenses over a period of time.

Ok, so what? That doesn’t tell us why is budgeting important, or even how it will benefit you specifically.

Well, that’s what this post is about. After going through all the different reasons you need to budget, you’ll be dying to create one!

First, what is Budgeting?

Before talking about why is budgeting important, let’s take a quick look at what budgeting is.

A budget is an estimate of your revenue and expenses. Some budgets cover a single event, such as a wedding or family reunion. Other budgets cover a period of time, such as a week, month, or year.

We often come up with excuses as to why budgeting doesn’t work. But believe it or not, we all create some type of budget every day!

Consider this:

• When you set your alarm clock before going to sleep, you’re creating a budget for sleep.
• When you leave for work in the morning at, let’s say 7 am, you’re giving yourself a 30-minute budget to arrive at the office.
• If you’re on a diet you might budget for 1,600 calories a day.

Whether we stick to those budgets or not can have a huge effect on our lives!

And the same is true for our financial budgets! Our choice to use financial planning budgets or not will affect our ability to save money, achieve financial goals, and a lot more.

Common Excuses For Not Budgeting

There’s no shortage of excuses for why budgeting doesn’t work. 

• I’m too busy
• I’m bad at math
• My expenses are constantly changing…

You may have heard these or even used these excuses before. But the fact is, budgeting is important even if we really don’t want to do it.

Why? Well, do you have an emergency fund to cover sudden unexpected catastrophes? Do you have enough saved to cope with another recession or economic shutdown?

If not, you may want to start planning the budget you need to get you prepared.

1) You’ll Start Living Within Your Means

The first benefit of creating a budget is that it’ll help you live within your means.

Most of us don’t pay attention to how we’re spending money. We’ll spend a little here, and little there, but these tiny purchases quickly add up!

A budget will help you catch this problem early by making you pay attention to where your money is going, no matter how small the purchase.

Honestly, this is the main benefit of budgeting. Which is why it’s #1 on the list!

Related Post: How to Create a Budget to Succeed Finacially.

2) Budgets Will Help You Achieve Financial Goals

Maybe you want to retire debt-free with a dream house in 20 years. Or perhaps you want to take a tour of Europe when you retire.

If not, you’ve probably got some other long term goals you want to achieve.

The only way you’ll achieve these long term goals is by taking steps to make them happen! And your budget is your road map!

For example, let’s say you need $10,000 to take that European tour. A budget will help you identify where you can cut spending and even help you calculate how long it’ll take to save the $10K!

The other option is to keep fantasizing about what you want and hoping it’ll fall into your lap!

Spoiler alert! It won’t…

3) A Budget Will Help You Save Money

A lot of us intend to save money from our paychecks.

But the problem is we buy groceries first, then pay bills, and then go out to have a little fun… (after that week you had, you deserved it!)

And by the time we’re done spending money, we don’t have anything to save.

Instead of spending first and saving last, try doing the reverse and pay yourself first!

Budget to save 10% of your money and don’t pay bills or do anything else until you put your savings somewhere safe! If 10% is too much for you, make it 5% or whatever you need to!

Just make sure you save some money yourself before you do anything else!

4) A Budget Will Reveal Your Spending Habits

We often don’t realize that our spending habits are costing us a fortune! But your budget can shed light on the damage that’s being done!

The trick is to budget your expenses and track your spending for the month. Then compare your budgeted spending with your actual spending.

I guarantee you will be shocked by how much money you spent!

When that happens, you don’t have to renounce all your pleasures. Just budget a little money for yourself so you can buy what you want without going overboard.

Related Post: Complete Guide  To Sinking Funds Categories. 

5) Get Rid of Debt

For a lot of us, debt will remain a constant part of our lives.

Despite what we learn from Dave Ramsey and other financial gurus, we’ll most likely keep paying interest on credit cards, consumer loans, and other debt.

If we can’t avoid it, we might as well learn to manage our debt really, really well!

Your budget can help you keep track of your debt payments so that you can at least avoid late fees.

And if you want to pay off our debt using the snowball method, your budget will really help you follow your progress.

6) Track Your Expenses

Your rent, internet bill, and subscription fees are probably constant every month.

But other bills, like utilities, food, gas, entertainment, change from month to month.

Since these expenses are always changing, it can be hard to know exactly how much money you’ll have left in the bank after all the auto-pays have processed…unless you’ve got a budget.

Companies will tell you in advance how much they’re charging you and when they’re going to withdraw the money. By tracking your living expenses in advance you’ll be able to plan your month better.

Related Post: 13 Budget Items You Never want to Forget

7) Create an Emergency Fund

You can’t cover everything with insurance. For things like car repairs and medical co-pays, you just have to pay with your own money.

This is why it’s important to have an emergency fund. And a budget can help you identify where to cut your spending and save extra money.

But sometimes the problem isn’t creating an emergency fund, it’s keeping it, right?

When putting together your spending plan it’s important to budget for all of your true expenses. This means don’t just budget for your monthly bills. Instead, budget for Christmas shopping, car repairs, and all the inevitable things that will happen.

By including everything you can think of in your budget, you’ll be able to build and keep your emergency fund longer.

8) A Budget Can Help You Invest

If you want to have a comfortable retirement, you need to have some investments!

Investing isn’t just for people making six figures. It’s something that anyone can do with a few extra bucks a month! And a good budget is an important tool for helping you find that extra cash!

Of course, you should always keep your emergency fund money in an account that you can access easily, but as you’re saving more and more money, consider putting it to work in the stock market.

9) Become More Organized and Disciplined

Consistent budgeting can change your habits and mindset.

Here’s an example of how it works.

Imagine you want to lose weight so you start counting your calories and eating smaller portions.

After a few weeks of this, you don’t have to count your calories anymore. Because you just know how much you should be eating. You’ve measured your portions and gotten used to the routine, so it’s become intuitive.

The same thing can happen with your money! Simply by creating a spending plan and following it closely for a few weeks you can train new habits into yourself.

10) Budgeting can Reduce Your Financial Stress

Have you ever gone shopping and prayed that your debit card wasn’t declined? That’s stressful.

In fact, any type of financial uncertainty is stressful! That’s why budget is so important!

Budgeting is how you make yourself aware of what’s happening and this reduces uncertainty. You’ll know that if you stick to the plan, you can survive the month.

That knowledge will give you a greater sense of control and bring peace of mind.

11) Stop Living Paycheck To Paycheck

From the moment you receive your paycheck, it’s all about paying the bills. Without proper money management and a smart spending plan, you’ll be stuck in that paycheck to paycheck cycle for a long time.

The first step to getting out of that cycle is to create a personal budget. It’ll help you figure out where you can cut your spending and save money in order to end paycheck to paycheck living.

12) You’ll Be Happier

Without a budget, we tend to buy whatever we want without much thought. But afterward, we feel guilty for overspending.

By budgeting a little spending money for yourself during the budgeting process, you can afford to go out and buy what you want without ruining your finances or cutting down on your little pleasures.

But that’s not all. When you reduce your stress, have money in the bank, get out of debt, and start making progress towards your financial goals, you’ll no doubt be happier.

The point is, you need budget!

Why Is Budgeting Important? The Bottom Line

Well, there you have it! Twelve benefits of starting your own budget, but there are many more!

Not everyone wants to budget, but the benefits are hard to ignore. If you’re tired of watching your money disappear and your debt grow, now’s the perfect time to come up with a spending plan.

You can get started by learning about different ways to budget your money and figuring out which works best for you.

Cheers!