What Is The Purpose Of A Budget?
Feb 11, 2018
If you are wondering why do you need to create a budget, I am going to tell you right now.
No matter if you like it or hate it, having a budget can help you improve your finances immediately.
The ultimate goal of a budget is to get you to the point that you will be able to spend intentionally on the things that are most important to you. This is the first step to financial freedom, even though it sounds like it is not.
Budgets should be temporary because they will tighten your spendings for a bit, so you can get your life back on track if you have derailed from it or have lost touch with your financial reality.
Why?
- First, because you will eliminate the guilt on how your money is spent.
- Second, because if you create a budget and decide where your money is going to go, you will feel in control and empowered.
- Third, because you know that you will have money every time to either put aside or to be able to achieve your bigger goals that are not immediate.
- Fourth, because it will eliminate the guessing game on where did your money go at the end of the month.
Basically, you are planning in advance how much you are going to allocate your money to each category in your life. I am talking about everything. I want you to know as detailed as possible how much money are you going to spend on food, entertainment, gifts, and every single detail of your life.
There might be things that you might have to cut out.
That is a budget.
A budget needs to be adjusted every month, depending on how much money is coming in and how much money is going to go out.
Some things need to be taken into consideration, like a bill that only comes up that month or a birthday gift, anniversaries, etc. These are things that can be part of your emergency fund.
One of the most important things to do on a budget is to make sure you are putting money aside for your midterm goals and long-term goals first.
Then after that, you create a spending plan for your short-term goals.
Always have an emergency fund in your budget. This will create a buffer in case something unexpected happens or those expenses that don't occur every single month.
But again, this is for emergencies or things that you were not expecting.
Buying a pair of the latest shoes that you happened to see while you were out, it is not an emergency. For something like this, we have created a clothing budget, and depending on your situation, you might or might not be able to buy it.
Remember, this is just temporary; once you are taking control of your finances, then we can create a spending plan.
The purpose of a spending plan is so you can achieve your long-term goals and reach them faster than later. This is the key to financial freedom. This is the key to make your money work for you.
How are you doing when it comes to money and spendings?
I HAVE TWO INVITATIONS FOR YOU...
First, I want to invite you to take the assessment below and see where you are right now.
TAKE THE FINANCIALLY FIT ASSESSMENT
Remember, it doesn't matter where you are; what matters is where you want to be, but to get to where you want to be, you need to know where you are today.
Second, in my mini-course, Fitness For Your Finances, I will show you how to be on top of the money game and get in financial shape. The best part is the no brainer cost, and you can't afford to miss the opportunity to get it.
So make sure to check it out here.
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