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If you don’t have a personal budget yet, you need to make one right now. It’s the best thing you can do for your finances.
Of course, you need to stick to it too! That is the hardest part.
In 2008, I met an accountant who is now a very good writer friend. She encouraged me to create a personal budget to meet my financial goals at the time that were very simple: get out of debt.
I’m since completely debt-free. While I have credit cards, they are for cashflow purposes only and they are always cleared off each month. I budget for them. I even have savings for the majority of needs in the future.
Here are my reasons why a personal budget is so important.
A personal budget shows you where money is going
One of the biggest benefits I found was seeing where my money was going. I always thought that it was going on essentials, like food, rent, and bills. In the end, I found that much of my money that could have been spent on debt was going on unnecessary, luxurious items. I would buy cookies while at the train station or a coffee between university lectures and work.
Seeing just how much you’re spending is important. You can work out where your money is going, and if you can cut back on anything. It can also give you a sign of why you’re going into debt each month.
Plan ahead to reduce spending
Once you know how much you spend and why, you can start looking at reducing your expenditure.
Planning ahead is essential. I make sure I have money for all the necessary outgoings, to cover the debts, and to put towards savings. I also have money available for the luxuries—such as going to Disney World or the Scottish Festival with the kids.
Prevent financial stress in the future
Knowing how much you have and planning your spending will lead to less financial stress. This is so important for life.
I find that when I’m worried about money—it does still happen now and then—I don’t sleep so well and I eat more junk food. That affects my weight and that then affects my mood. I end up forcing myself to work extra hours to try and make up for the missing money. Having a personal budget limits the financial stress considerably.
If you have others in the household, let them know the budget and work on one together. I had to when my ex-husband lived with me. He would spend and spend and spend if he was allowed to—that’s what he does now! By having the budget and some saving goals, it was easier to curb his spending. I leave him to it now.
MORE: Is a car loan a good idea for your credit score?
A personal budget doesn’t solve all your financial problems, but it does definitely help. Creating one was the best decision I ever made, and I encourage anyone to create one and stay on top of it each month.
Get in touch to help set up your personal budget.
