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Five Reasons You Should Budget

Money plays an important role in almost every aspect of our lives. Therefore, having a budget – a plan for allocating that money – is not just a good idea, but also an essential practice.

Still, many of us overlook the need to budget because we think it’s unnecessary or restrictive. Some of us are even afraid to take a close look at our income and expenditure. However, as you’ll soon see, budgeting can put you on the road to financial stability and help you to reach your goals.

Budgeting Increases Financial Awareness

One of the main reasons you should have a budget is to get a clear picture of your financial situation. By tracking your income and expenses, you’ll see exactly where your money is coming from and where it is going. This will enable you to make informed decisions about your finances.

It Makes It Easier to Set Goals and Achieve Them

Do you want to save up for a deposit on a house, to put some funds away for your children’s education, or to have enough money to comfortably enjoy a trip overseas? Yes? Then you need a budget. This will help you to prioritise your spending and allocate resources towards the things that matter most. Think of it as a roadmap that you should follow over time.

You’ll Be Better Able to Manage Debt

If you have debt and you’re not tracking it carefully, it can easily spiral out of control. When you have a budget, you will allocate funds towards repaying existing loans in the same way you put money aside for food or rent. Tracking your expenses will also help you to identify areas where you can cut back, so you can free up cash to pay down your debt faster. This will help you to save on interest payments. A budget can also assist you in evaluating whether you have the ability to take on new debt.

Emergencies Won’t Seem So Daunting

We’re all familiar with unexpected expenses such as medical emergencies or urgent home or car repairs. A budget allows you to set aside funds for emergencies so when the unpredicted happens, you have a safety net to support you. Peace of mind is priceless.

Financial Freedom Can Be a Reality

Living more comfortably without being too constrained by money doesn’t have to be a pipe dream. Budgeting is ultimately aimed at achieving financial freedom. While the results won’t be immediate, building healthy spending habits and saving diligently can help you to create wealth over time.

A budget can empower you and your household. By understanding why you should create and follow one, you can take control of your finances and realise your dreams.

Visit our MoneySmart hub for more articles, videos, and tips on how to secure your finances. Have a specific question you’d like answered? Submit it and it could be answered in our Ask the Expert column.