Budgeting is one of the biggest keys to really managing your money. Many people are often turned off by the simple term budget. They associate it with restrictions and a lot of hassle and headaches. They may feel like they are too poor to budget. However, budgeting can actually save you money, and allow you to have more to spend by helping you to make the most of your money. Your budgeting style can determine how successful you are at budgeting. Here are five things that will help you look at budgeting in a new light. You may also want to review these reasons to start budgeting.
1. Budgeting Stops Overspending
Most people who do not have a budget end up overspending each month. This limits their spending power in the future as more and more of their salaries have to be applied to debt payments. If you are worried about restricting your spending, consider what it would feel like to have the majority of your paycheck be applied to credit card payments. The stress of finding a way to pay for the rising cost of gas and food can be astronomically when most of your paycheck is already planned.
2. Budgeting Helps You Save Money
People who do not have a budget tend to save less money than people who do. This is because when you budget you assign your money to do certain things. This allows you to automatically put money into a savings or investment account each month. A budget can help you stop dipping into your savings each month. As you do this you will begin to build wealth. This will give you true financial freedom in the future.
3. Budgeting Doesn't Have to be Restrictive
Most people do not like the restrictions that having a budget puts on them. However you decide how much you spend in each category. So if you want to put a large portion of your money towards your leisure activities, as long as you are saving and meeting your other needs, you shouldn't feel bad about that. However once you set up limits you need to stick to them. If you aren't doing that you may have a budgeting weakness that you need to address. Budgeting is not about limiting the fun in your life, but opening up opportunities and money in order to have more fun. The key is remembering to include these categories in your budget.
4. Budgeting Can Be Flexible
Budgeting can be flexible. You can move money between categories as you need to throughout the month. Generally you should restrict yourself from touching the money you have set aside for savings, but you can adjust the amount you spend on each category as you go. This is another way that you can keep yourself from overspending.
5. Budgeting Can Be Simple
Budgeting can be simple. You can simplify the process by using percentages of your income to cover your set expenses, savings amounts and your spending money. Then you simply track the money as you spend it. This means there a lot fewer categories and a lot more flexibility. You may decide to switch to an envelope system, which eliminates the need to track your spending.