Why you need a budget?
Managing money can be a challenging especially when it comes to personal finances. This task has been and still is a challenge for me, but it is not an impossible task.
The first step to personal finance management is to create a budget to fit your needs. Your budget will change many times even monthly in a single year until you create a budget that meets your needs and goals.
Why you need a budget?
- To know where your money is going.
- To execute a plan or vision for your finances
- To have a fulfilling life
Know where your money is going
Knowing where your money is going can be an eye-opening experience. Realizing how much your lifestyle of quick conveniences like your gourmet coffee or eating out several times a week is costing you can be a shock! The average gourmet coffee cost around $7 to $10 and most restaurant meals cost between $15 to $25 per person, these conveniences add up quickly! You also may realize more money is going out of your pocket than is going into your pocket!
If you are tired of paying bills paycheck to paycheck and never getting ahead, budgeting is the first step to getting your finances in order!
You want your hard-earned money working for you. You should not be work for your money. We work to live, not live to work, as the saying goes.
Conduct a money audit
Conducting a money audit will show you where your money is going. Lookup those bank, credit card, and loan statements. Review the charges and categorized each expense.
Some example money audit categories include income, mortgage, utilities, insurance (health, vehicle, homeowners, etc.), credit card and loan payments, restaurants, clothing, groceries, pet expenses, etc.
I use a credit card to pay for most of my expenses, so my credit card will categorize my charges for me. This is a helpful tool for a quick overview, but a deep dive into restaurant expense can be enlightening. When are you eating at restaurant? For lunch with co-workers, coffee with friends, take out for dinner.
Have a plan for your money
Having a plan or vision for your money helps guide you to where you want your future self to be in life. Where do you see yourself in one year? Three years? Five years? What is your 10-year plan?
A plan for your money helps you prepare for the unexpected. When life throws us a curve ball like an illness, death, or job loss, having your finances in order can help mitigate the outcomes.
Ask yourself these questions when creating a budget: What would I do if I got layoff from my job? Where and how do I want to live? How am I going to fund my hobbies (travel, music, art, fitness, etc.)? When do I want to retire?
Budging not only gives transparency in your spending habits, but it also shows where your money is going. How you spend your money tell a story of what is important to you.
Having a budge or plan for your money will help you decide how to answer those questions above and to build a safety net into your finances.
Why I budget? To have a fulfilling life!
Learning how to manage money will helps me to use money wisely and for the things that truly matter to me. I was able to learn a lot about my spending habits and what is important to me and prioritizing the important items in my budget.
When I was in my twenties, I was living paycheck to paycheck like many of you, but I did not want to live my whole life paycheck to paycheck. I worked diligently to make and follow a financial plan to break out of the paycheck-to-paycheck cycle.
My budget has changed many times based on my needs, life phase, and interests. I did not follow my financial plan perfectly; however, budgeting has gotten me farther in my financial journey that if I did not have a plan at all.
I encourage you to join me on my financial journey to living a prosperous life. I will share ideas and tips that have worked for me. Our passion for Her Prosperous Path is to help and inspire the community of readers to reach your prosperous life.
