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We work hard to earn a living. We should make sure we spend the money we bring home wisely. That’s where a household budget comes in. It’s an excellent tool that expands our financial awareness. It gives you an idea of what’s coming in, and what’s going out. It also shows you if there’s anything left at the end of the month to put into savings.
Before we dive into exactly what a budget can do for you, let’s consider for a minute what will happen if you’re not tracking income and expenses.
First and foremost, you may end up spending more than you’re making in a given month (or two, or three) over time that can put you into some pretty hot water financially. You may also spend a lot more than you’d like on things like eating out, going to the movies or new clothes.
Having a budget gives you more control over where you want to really spend your hard-earned cash. Maybe that’s dinner and a movie, but perhaps it isn’t. Wouldn’t it be nice to have an actual choice?
Why You Need To Keep A Household Budget
#1 Tracks Where Your Money Is Going
A budget simply tracks your money. You record where the money comes from each month (your income) and then write out everything you spend it on, starting with your regular monthly bills like mortgage or rent, car payments, utility bills, etc. What’s left after you pay all the bills is your discretional income.
#2 Helps You Prepare For Emergencies
When you have a budget, you are aware of what each of your dollars does. As a result, you can save more and have something set aside for emergencies, which will lessen your financial stress.
#3 Helps You Identify Things You Waste Money On
Having it all in front of you in black and white helps you identify things you’re wasting your money on.
It makes you reconsider if you really want to spend well over $200 a month on Cable TV or $150 on your large cell phone plan. Or how about that yearly magazine subscription to something you no longer read? Go through your expenses and reevaluate if this is REALLY how you want to spend your paycheck.
#4 Allows You To Be Proactive About Savings
Saving money without a budget is hard. We go in with the best of intentions at the beginning of the month, but somehow there isn’t anything left at the end of the month.
A budget gives you a chance to be a bit more proactive. Set aside some money for savings at the beginning of the month, even if it’s just $20. Put it in the budget as a regular expense, just like you do with your other urgent bills. If you need to, open a separate saving account, so you’re not tempted to spend it.
#5 Ensures You’re Not Spending More Than You’re Making
Most importantly, your budget will keep you on track and help you make sure you’re not spending more than you’re making. And I don’t have to tell you that that’s pretty important for your financial wellbeing.
Last Thing You Need To Know
Having a household budget can seem so unimportant, but if you look more into it and it’s benefits, you’ll realize that everyone should have a household budget. Check out How To Create A Budget to learn more about how to start your budget.
However, a budget is nothing without discipline. For a budget to work for you, you have to work on it diligently. Only then can you reap the benefits of having a household budget.