Budgeting changed my life.
And I know it can do the same for others.
But if you’ve never budgeted before, you may be struggling to understand what makes budgeting so powerful.
And you may be asking yourself “Why is budgeting important?”
Budgeting is the tool you need to take control of your finances.
With a budget, you will be able to stay out of debt (or pay off debt), save for emergencies, prepare for upcoming expenses, and start saving for your future.
This in turn will reduce your money stress and help you achieve your money goals.
A budget is the foundation you need to unleash the money boss that you are.
Let’s start with what budgeting is and then we’ll dive into how budgeting can help you.
What is Budgeting?
Budgeting is creating a plan for how you want to use your hard-earned money over a certain length of time.
It’s a way to create a spending plan that balances your income with your expenses. Because if you spend more than you make, money problems are sure to follow.
Budgeting also allows you to create a plan for how you want your money to support your life goals. It’s taking your money and using it on the things that are important to you.
The goal is for your budget to help you plan for the now and the future.
Why is it Important to Have a Budget?
Budgeting is the framework you need to reach your financial goals.
It ensures that you have enough money for everything you need and the things that you value. A budget will help you spend less than you earn to stay out of debt or to start paying off the debt you currently have.
So if you do just one thing to improve your finances, create a budget and stick to it.
Let’s take a look at why it’s important to have a budget in your life.
Budgeting Helps You Take Control of Your Money
When you have a plan for your money, you get to decide how it is going to help you reach your goals.
And that feeling of being in control of your finances is priceless.
Even if you are struggling to get out of debt or save up money, having a plan will not only help you reach your goals but you will feel less stress along the way.
With your budget in hand, you will tackle your money goals one at a time and start feeling like the money boss that you are.
Budgeting Helps You Reach Your Savings Goals
Saving money is no easy task.
And most of us treat saving as the thing we will do with whatever is left over after paying our bills and covering our expenses.
But the problem with that strategy is that more often than not, saving money gets pushed aside. And we don’t do it. We tell ourselves that we’ll start saving next month.
This is something I struggled with in my early adult days.
But when you have a budget, saving now becomes a priority because it’s part of your budget.
This will help make saving money just as important as paying your bills.
Budgeting Helps You Avoid Debt
With a budget, you will be able to plan for all of your expenses.
This includes both your monthly as well as those non-monthly expenses that tend to creep up on you such as annual subscription fees or insurance payments.
By being able to plan for all of your expenses, you will be able to make sure you have the money set aside to cover those expenses, no matter when they are due.
Budgeting for every expense will prevent you from having to take on debt to cover those expenses that can sneak up on you.
Budgeting also allows you to plan for big future expenses like buying a car, home improvements, or a vacation. That way you won’t have to take out a loan to cover them.
Within your budget, you can set aside money each month in what’s called a sinking fund to cover future large expenses. These sinking funds will prevent you from taking on debt when you find yourself needing a new car.
Budgeting Helps You Get Out of Debt
Budgeting will help you control your spending so that you can put more money towards your debt repayment.
Without a budget, it’s easy to spend the money that’s not going towards your bills instead of putting it towards your debt repayment.
But debt can be detrimental to our financial health. With interest fees that can add up quickly, it’s important to knock down or eliminate debt as quickly as possible.
It’s important to figure out how to relieve yourself of the financial and physical stress debt can cause. And a budget can help you do just that.
Budgeting Helps You To Stop Overspending
I was constantly overspending before I had a budget.
Every month I was scrambling to see if I had enough money in my bank accounts to cover my bills and credit card spending.
But with a budget, you can finally start to curb that overspending habit. I did!
A budget is important because it helps you set spending guidelines for yourself.
And with a budget, you can see how overspending in one category is going to affect your other life priorities.
That is how budgeting helps you to stop overspending.
Budgeting Helps You Spend Mindfully
How often do you find yourself mindlessly purchasing things you do not need?
Did you go to Target for some milk but ended up with an entire cart full of home goods?
It’s so easy to spend money on things we don’t need or never thought we needed.
Mindful spending is when you are aware of how your spending aligns with your priorities in life.
And a budget will help you stay aware of your priorities. Therefore, when tempted, you can stay mindful and say no when a potential purchase doesn’t align with the things that are important to you at this moment.
Bonus: mindful spending also helps you to stop overspending. 😉
Budgeting Helps You Cut Expenses
Having a budget will help you identify where you can cut back on your spending so that you can meet your other money goals, like paying off debt or saving more money.
A budget is a record of all of your spending, so you’re able to see if that spending aligns with your priorities.
Maybe you aren’t saving as much as you would like, but when you look at your budget, you find that you spent a lot more on dining out than you thought.
A budget gives you the big picture so you can decide what you can cut back on to free up money and save.
Budgeting Helps You Reduce Your Stress Around Money
This one is huge!
Money is the cause of so much stress in our lives.
And while a budget will not relieve you of all of your money stress, it can certainly reduce it.
A budget is important because it helps you see upcoming expenses so that you can plan and have the money saved up for them.
Because you already planned for it, there will be less stress around trying to figure out how the heck you are going to pay that bill.
Budgeting Helps You Prepare for Financial Emergencies
Having an emergency fund is an essential part of healthy personal finances. It protects you from going into debt and it helps you reach your money goals.
Unfortunately getting yourself to stash cash into an emergency fund—money that just sits there—is no easy task.
The good news is that a budget makes it easier to set money aside for an emergency.
A budget is a tool that helps you prioritize what you want your money to do for you. And if you want to create an emergency fund, then you put it into your budget.
Your budget will then give you your entire financial picture to help you figure out how to adjust your spending so you can stash a bit of cash into an emergency fund each month.
Budgeting Helps You Spend Money Guilt-Free
So often we feel guilty after spending money.
Sometimes this guilt is because we overspent and sometimes this guilt is simply because we spent money.
But with a budget, you can start to alleviate this guilt.
First, a budget will help you stop overspending because you know how much money you can spend on something.
And second, a budget allows you to create a spending plan for the things that are important to you. So if you spend within your budget, those feelings of guilt are less likely to creep up.
This is because you know that you spent money on something that was planned for and important to you.
Budgeting Helps You Stay Flexible
Having a budget allows you to be flexible in your spending when needed.
Budgets allow you to intentionally move money from one spending category to another.
Let’s say this month you made a huge Costco run, so your grocery expenses are a bit larger than normal this month. That’s ok. You can move money from another spending category to cover this overage, or simply budget less next month in groceries.
The beauty is that budgeting doesn’t have to be strict. It can be flexible.
Another bonus to this is that a budget will help you see patterns in your spending.
If your budget shows that you are constantly overspending on groceries each month, you can make a choice. You can figure out a way to cut back on grocery spending or you can budget more money each month for groceries by budgeting less in another category.
Budgeting Helps Couples Get On the Same Financial Page
According to a study by TD Bank, one-third of married couples admitted to arguing about money at least once a month.
Having a budget as a couple, whether married or not, is the ultimate way to get on the same page financially with your partner and stop arguing about money.
When you budget as a couple, you align your money with the goals you have as a couple while still creating space for each of your individual goals.
This will get you on the same page financially and eliminate those money arguments.
You Got This
Budgeting has changed my life.
I no longer feel stress about my upcoming bills and I feel good about the way I’m able to use my money to help me achieve my goals. For me, none of this would be possible without my budget.
But if you have never budgeted, it’s hard to know just how important budgeting is for your financial health.
Therefore, I hope the reasons listed above inspired you to create your own budget and start taking control of your money.
If you want to learn more about budgeting, check out these related posts to get you started: