I’m sure you’ve heard of budgeting, but do you ever find yourself wondering why you would need a budget? Why should you put forth the time and effort in creating one?
In my previous blog post, I shared some tips on How to Make a Monthly Budget for Beginners and if you’d like to start your own budget now, you can download my simple budget template printable by clicking the image below.
A budget has been an essential part of keeping our family spending in check. And, it is something that I review almost everyday and as needed when income or expense changes occur.
What is a budget?
A budget is simply a plan for your money. When you are budgeting, you are telling your money where to go. You should write it down and prioritize what gets paid first.
If you are asking yourself if your family needs a budget, the answer is yes, you need a family budget. Every family should have a budget, in my opinion.
A budget is not only for the wealthy or the frugal people who enjoy saving money. A budget is for everyone – no matter the income.
8 Reasons Why You Need A Budget
You need a budget…
1. To Know Where Your Money Is Going
When you do your budget, you know where your money is going. When you know where your money is going, you are able to save money and stop living paycheck to paycheck.
A budget lets you control your money instead of your money controlling you. When you know where your money has been going, you can prioritize your spending and start telling it where to go instead. This will help you achieve your goals and plan for your future.
When you don’t have a budget and are just spending whatever money you have, your money is not serving you. It’s probably making your life more stressful and it’s not helping you achieve your financial goals.
When you take control of your money, it serves a purpose for you. It reduces stress, and works for your goals instead of having nothing to show for all your hard-earned money.
Spending with no set plan and no idea where your money has gone leads to an empty wallet as well as an empty savings account. If you know on paper what your grocery, fast food, or transpo allowance for the week is, then you are less likely to overspend and be scrambling to pay utilities and other basic bills on time. Late fees add up quickly and can keep spiraling out of control.
In our household, my husband and I are now more intentional about where our money (household budget) goes each month. We have bi-monthly budget meetings and we discuss our finances frequently throughout the month.
I don’t worry anymore about when and how we will be able to pay the bills, because we already have it mapped out at the beginning of the month.
It’s crazy how we let ourselves get completely overwhelmed and stressed out about money, when something so simple as having a written plan can take away so much fear and anxiety.
2. To Help You Identify Unnecessary Expenses
Creating and reviewing your budget can help you identify where you are spending unnecessarily. Maybe it’s big things like grocery purchases that you didn’t plan on, or cable subscription that you don’t really need, or small things like coffee or milk tea, snacks out, a cute décor, etc.
What are you mindlessly spending money on every week that you could be using to pay off debt or save for your emergency fund?
- How much did you spend at Shopee or Lazada last month?
- How many times did you order food online this week?
- Could you be making your lunch instead of hitting up the fast food chains on your break?
Sometimes we don’t even realize how much little purchases add up and eat away at what could be savings or used for paying down debts.
Yes, you can absolutely still spend money on fun things, but set aside an exact amount so you don’t end up spending your electric bill money on an online shopping spree.
Really dig in to your spending habits, eliminate what you can live without, and make a written budget for the rest.
3. To Avoid Late Fees
When you do a budget, it is easier to keep track of how much you have and where it is going and when. When you have a plan for your money and stick to it, you get to pay your bills on time without overdrawing your account or paying for late fees.
Recently, a family member had to pay ₱800 late payment fee for failing to pay her credit card bill on time. She requested for a reversal, but the bank refused, so she ended up paying it.
Overdrafts and late fees are just wasted money. When you have your written budget, you know when things are due and can avoid late fees!
4. To Pay Off Your Debt
Having a budget will help you in paying down debt. Make a plan for paying off more than just the interest. Once you are cutting out wasteful spending, you’ll be surprised that you still have money left over and you can use that money to pay extra on credit cards, car loans, and the mortgage.
When you manage your money, you can actually save it and pay off your debt faster. Debt doesn’t have to be a way of life forever. It is possible to become debt-free and stay that way. And you can start with a budget.
5. To Prevent Debt
If you don’t know where your money is going, you will inevitably be spending more than you make. This will cause you to run out of money, and need to reach for a credit card or loan to make ends meet.
When you have a budget, you know exactly how much money is coming in, and then you can decide what you will spend it on.
If you just rely on how much is in your wallet or bank account that day, you don’t have a plan and you will start using debt as a resource.
6. To Help You Save Money
Budgeting your money helps you save and plan for the future. While it may seem a long way off, college tuition and retirement aren’t as far away as you think. Don’t let it take you by surprise, and don’t rely on your SSS or GSIS pension, it is not usually enough for people to live on as a sole source of income.
With a budget, you are able to see where your money has been going and it gives you more control to save it.
It is harder to let it go when you see every peso on paper. I highly recommend having a written budget as it becomes more real. This will make you more likely to stick to it, save money, and cut expenses. Once you see how much you are spending on certain categories, you will be more willing to take action and reduce the amounts.
There are lots of ways to save money but it starts with being intentional with the money you already have. Once you do that, you will find it so much easier to save money. You won’t be spending money on things that are not a priority to you. This will help you save money on all kinds of things.
If you want to save money on groceries, check your grocery list and prioritize your needs over your wants.
If your priority is saving for an emergency fund, then put it in the budget. Setting and sticking to a budget can assure that you can financially handle emergencies that may pop up – a blown tire, a leaky roof, or a medical emergency that catch you by surprise. If you have savings figured into your budget, this acts as a safety net to get you through.
If you have no clue where your money is going and have no plan, you will never make progress on your savings goals.
Having a budget is a necessary place to start if you are looking to stretch your money and really make some progress in growing a savings account. When we are able to reign in certain expenses that we were previously unaware of, your savings in these areas can go right into your savings account. Then, watch those savings grow!
Having financial security in your future, and even your day to day spending will also give you a sense of pride and accomplishment in yourself, that alone is an invaluable reason to budget your money.
So take control of your financial future and make a budget!
7. To Find Ways to Earn More Money
Sometimes a budget will show you that it’s not a spending problem but an income problem. In which case, you have to think of some ways to bring in more money.
When you create a budget and you found out that your expenses are way more than your income, it will motivate you to find ways to reduce your expenses and to earn additional income.
8. To Set A Good Example To Your Kids In Terms of Money Management
A budget is an incredible way to have the entire family on the same page when it comes to handling money matters.
Budgeting can be a difficult concept to grasp, but involving your kids in the budgeting process can provide a wonderful example that could help them become better money managers in the future.
How Budgeting Has Helped Me Through The Years
Taking and making the time to create a budget will be time well spent. Having adhered to a budget for nearly 15 years has been a life saver in my life numerous times.
Having a budget when I was in college helped me realize that I should not just rely on my scholarships (as an academic scholar and a varsity player) to get through college. That I needed to take a part-time job as a Student Assistant in school to pay for my photocopies (because I couldn’t afford to buy books). That I needed to take other side hustles to be able to eat at least two times a day (having brunch most of the time to save money) and to buy my other personal needs.
Because I had a budget, I knew my numbers – how much money I currently have and how much money I need where and when. I knew when it was time to walk to school, which was almost 5 kilometers from where I live, just to save money for other priorities.
I had classmates who were in a similar situation, but some of them chose to give up their studies because they said ‘they had no budget’. I thank God for giving me the wisdom and strength to manage the limited resources that He entrusted to me, to find ways to meet my needs, and to persevere through life’s difficulties. By God’s grace, I graduated with one of the highest honors in college, and I offer all the honor, praise, and glory to Him who has always been with me and who has never left me nor forsaken me.
Having a budget even when I was just barely earning ₱15,000 per month on my first employment allowed me to send my three siblings to college with the help of my parents while paying our rent, food and all our allowances. I had to work overtime and teach part-time to be able to make ends meet. It was hard but I learned to manage my budget wisely and be frugal.
Now that I am married and have my own family, having a budget has been a life saver for us numerous times. Having a budget helps us to prioritize our needs over our wants and to make some progress toward our financial goals, big and small. We may be far from achieving many of our goals, but with a working budget in place, we know that we are on track because we are well aware of the money coming in and the money going out.
Budgeting is a very straight forward process. You get paid, you categorize your expenses, you track your spending to know where you are at, and you stick to your plan.
However, it’s still a difficult job, it looks easy on pen and paper but it doesn’t include the human factors of wanting and spending habits. We have all developed habits when it comes to money, some of us are natural savers and most of us are natural spenders.
The trick to make a budget work is to find your “why” when it comes to budgeting and it can literally be anything that gives you the motivation to do better with your money.
For me, it is my daughter. I want to give her a better life than I had where she isn’t constrained by her parents not having enough money. My husband and I work hard and budget even harder not only to pay the bills and prepare for the future, but also to be able to give and be a channel of blessing to others.
How about you, what’s your why?
Feel free to share your thoughts on why you should budget your money in the comments and let’s talk soon.
You can also download my free budget template and start your budget today.
Thanks for reading and may God bless and prosper you.