Author: Total Advice Partners | Financial Planning, News
We never stop hearing about the importance of budgeting in our day to day lives and this is rightly so. The substantial benefits far outweigh the time cost both in the short and long term. In our current market climate budgeting is more important than ever to ensure you and your family have financial security and are working effectively to achieve financial or lifestyle goals.
1. Have set goals and objectives you wish to achieve
A budget can help you determine your long-term goals and put you on the path of working towards them. Having a set criteria or map of how to allocate your spending will ensure you can live within your means and work towards the purchase of those items such as a new car, down payment on a house or even a family holiday.
2. Ensuring you don’t spend money you don’t have
Discretionary spending is one area where consumers have always spent more money than they have – we seem to owe it all on credit cards. A recent study by WalletHub determined that the average credit card debt per household reached $8,377 in 2016. This goes to show that we are spending on credit rather than using saved funds to cover our lifestyles.
3. Ensure you are happy in retirement
The importance of contributing a portion of your funds from your budget to investments will become more evident in later years. Setting aside a set portion of your income in your budget to be used for retirement and investment purposes will help you build your ‘nest egg’.
4. It helps to be prepared for emergencies
You can never really know when the unexpected will occur, as life is filled with surprises, some good and some bad. Having an emergency fund helps you have peace of mind knowing you have funds available should the need arise. For most of us this would be between three to six months’ worth of living expenses – this is something to also build into your budget. It doesn’t need to happen overnight rather, it can be built up over time.
5. Budgeting will help address bad spending habits
Building a budget forces you to take control of your spending habits. This may help you to notice certain items or areas you are spending more than necessary on. Often asking yourself the question whether this is a necessity will help you determine its cost/benefit to you. This will assist you to rethink the way you spend money and re-focus your financial goals and objectives moving forward.
Want to know more?
Meeting with one of our financial advisers will assist you towards identifying goals and objectives. By formalising these, you have something tangible for your budget to achieve at this point, you and your adviser can discuss to improve your budget and work towards achieving goals. Call us on (07) 3284 7875 to speak with us today.
(P) (07) 3284 7875 | (F) (07) 3284 4790
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FAQs
Why budgeting is important: 5 key benefits
- Keeps you from overspending. ...
- Enables you to manage debt and build credit. ...
- Gets you moving toward your short- and long-term goals. ...
- Prepares you for emergencies. ...
- Makes saving for retirement easier. ...
- Use a budget to gain control of your financial life.
What Are the 5 Basic Elements of a Budget?
- Income. The first place that you should start when thinking about your budget is your income. ...
- Fixed Expenses. ...
- Debt. ...
- Flexible and Unplanned Expenses. ...
- Savings.
A budget can also set you on the right path to achieving your financial goals, spending within your means, saving for retirement, building an emergency fund, and analyzing your spending habits.
What are the 3 main reasons to have a budget? ›
Budgeting keeps your finances under control, shows when you need to make adjustments to your spending, and helps you decide where your money goes instead of wondering where it all went. Budgeting helps you answer these important questions: Where does all my money go? Is there a way to spend less?
What are the 4 most important reasons for creating a budget? ›
Atlantic Blog
- Know Where Your Money Goes. One of the most basic yet important reasons a budget is essential is to know where your money goes each month. ...
- Eliminate Frivolous Spending. ...
- Break Free from Credit Card Debt. ...
- Build Your Savings. ...
- Identify If You're Living Beyond Your Means. ...
- Improve Your Mental Health.
A budget expresses intended expenditures along with proposals for how to meet them with resources. A budget may express a surplus, providing resources for use at a future time, or a deficit in which expenditures exceed income or other resources.
What are the five key ways budgets are used? ›
The 5 most common approaches to budgeting
- Incremental budgeting. Incremental budgeting computes a budget by applying adjustments to the preceding period's actuals. ...
- Zero-based budgeting (ZBB) ...
- Rolling (continuous) budgeting. ...
- Activity-based Budgeting (ABB) ...
- Performance-based Budgeting (PBB)
b) Sales budget is the most important budget among all budgets.
What are the 4 A's of budgeting? ›
Spending a few minutes each week to maintain your cash management program can help you to keep track of how you spend your money and pursue your financial goals. Any good cash management system revolves around the four As – Accounting, Analysis, Allocation, and Adjustment.
What are the three most important parts of budgeting? ›
Answer and Explanation: Planning, controlling, and evaluating performance are the three primary goals of budgeting. Planning: Budgeting is a planning tool that enables businesses to establish quantifiable financial targets for the future. They are able to prioritize tasks and allocate resources more wisely as a result.
Talk to a Professional About Reaching Your Financial Goals
- Budgeting Can Help You in an Emergency.
- Budgeting Can Help with Retirement.
- Budgeting Can Help You Fix Bad Spending Habits.
- Budgeting Gives You Control of Your Finances.
- Budgeting Ensures You Only Spend What You Can Afford.
- Budgeting Can Improve Family Life.
Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. Budgeting is simply balancing your expenses with your income.
What are the 3 P's of budgeting? ›
Does the idea of creating a budget seem overwhelming? It shouldn't. You can start having more control over your finances today by using the three P's: paycheck, prioritize and plan.
What are the 3 most important parts of budgeting? ›
Answer and Explanation: Planning, controlling, and evaluating performance are the three primary goals of budgeting. Planning: Budgeting is a planning tool that enables businesses to establish quantifiable financial targets for the future. They are able to prioritize tasks and allocate resources more wisely as a result.
What is a budget What are the benefits of budgeting? ›
It helps manage your money so you can cover the essentials and have enough left over to save. It can help you understand where your money goes, what you can afford and makes sure debts are paid. Budgeting can give you peace of mind that you can handle an unexpected expense.
What are 3 characteristics of a good budget? ›
To be successful, a budget must be Well-Planned, Flexible, Realistic, and Clearly Communicated.
