You don’t think budget is important, do you?

I hope that you will not wake up at a certain age and start asking, “where did all my money go?”, “What did I use them for?

“The truth is numbers don’t lie, and the best way to know where your money goes is by creating a budget.

How do you define budget?

A budget is an estimation of revenue and expenses over a specified future period and is usually compiled and re-evaluated periodically.

Budgeting helps you determine if you are spending more or less than your income. This data or chart reflects the inflow and outflow of funds. In a way that helps to reduce or eliminate spending consumption.

You do not have to like numbers to start setting out your budget. Anyone can start making records of his income and expenditures. You can write it down and paste it in a position that is easily accessible.

Why are budgets important, anyway?

Four words…..For Effective Financial Plan.

You cannot create an effective Financial Plan without a budget in mind. These two are inseparable.

What is a financial plan?

A financial plan is a comprehensive understanding and evaluation of your current financial state in comparison to your long-term goals, as well as the steps needed to achieve these set goals.

The general knowledge of your financial state. An overall comparison to your long-term goals. And steps set up to achieve them define a financial plan.

This means you are looking at what you have at hand, and where you are. Moving on to create a map for where you intend to be financial.

What are the things you have to create a budget for?

Read also: Calculating your net worth for financial independence

You have to use specific figures, or estimates, for accuracy when budgeting for things such as; income, black tax(obligations or funds to assist family members), debts, savings, assets, investments, insurance, groceries, Utility Bill, transportation, travel, etc.

What are the importance of creating a budget?

Without budgeting, you are likely to spend more than you earn. You will learn to manage your money effectively with a budget insight.

It won’t be difficult to track your financial goals, and how good or bad you are doing. It helps you make your plans a reality. This is because you will be able to plan for a new gadget, dresses, furniture, travel expenses, etc.

At the same time, you will notice a decline in your buying impulse. As you will only buy the things you need, thus, unnecessary expenses will be cut off.

The most beautiful part of budgeting is realizing which area of your life takes the most funds. You may think you spend more on your wardrobe whereas, it’s the groceries that eat into your money bag more.

With budgeting, you will see that you are certain about how much you need and for what. You can tell how long you can last without working or getting paid. You will know how to deal with emergencies so that you do not fall into debt.

Previous articleCalculating Your Net Worth for Financial Independence
Next articleHow to manage your money effectively

1 Comment

Comments are closed.