According to a worldwide survey conducted by VISA, only 49% of Canadians keep and follow a household budget. If you fall into the other 51%, you probably have your own reasons why you don’t budget. Maybe you’ve never really thought about budgeting, or maybe you think it’s unnecessary. Or perhaps you think you’re getting along fine without one.
Regardless of your reasons, budgeting your money is a critical part of successful financial management. Here are 7 reasons why budgeting your money is a must:
#1: It shows you where your money is going.
Have you ever gotten to the end of a pay period, checked your bank account, and asked yourself, “Where did all my money go?!” A budget can answer this question. The first step to creating a budget is to track your expenses. This is often a wake-up call for many people. Following a budget also encourages you to track your spending carefully, so you don’t go overspend.
#2: It helps you identify waste.
If you’ve never budgeted or tracked your expenses before, you might be surprised at how much money you probably waste each month. For example, maybe you stop for coffee every morning on the way to work without thinking that this habit can easily add up to $100 a month. Once you identify where your money is going, it helps you identify wasteful spending.
#3: It helps you make financial decisions.
By allocating a certain amount of money to each category, you can better make financial decisions. Your budget can help you identify whether you’re spending too much in one category and not enough in another. Based on this information, you can make better financial decisions for your family.
#4: It helps you reach your goals.
Most of us have financial goals, such as paying down debt, saving for college or retirement, or building up an emergency fund. A budget can help you reach these goals faster by helping you map a plan that gets you there.
#5: It keeps you from accumulating too much debt.
Oftentimes, we run up debt as a result of mismanaging money and overspending on certain things. A budget can keep you out of the debt trap by helping you spend less than you earn so you don’t have to rely on credit cards.
#6: It gives you a clear picture of your finances.
By monitoring how much money you have coming in and going out each month, you can better assess your finances and make adjustments as necessary. For example, if you’re barely scraping by each month, a budget can help you know where you can afford to trim your expenses.
#7: It provides peace of mind.
A budget gives you peace of mind by helping you know exactly how much money you have at any given time. It takes the guesswork out of spending so you know whether or not you have any cash to spend.
These seven reasons can motivate you to start budgeting and take better control of your financial future.