Why You Need to Budget

A budget helps keep bill payments on time.

A personal budget outlines your financial responsibilities and the flow of your money. A budget itself doesn't mean you have to live on beans and never buy new clothes. It simply provides a framework for spending. Whether you struggle to pay your bills or have plenty of money left at the end of the month, a budget benefits your financial health.

Timely Bill Payments

A budget makes it easier to keep your bill payments on time. By laying out all of your financial obligations, you create an accurate list of the bills you need to pay each month. A regular budget decreases the chances of missing a payment from being disorganized or forgetting about a particular bill. If bill payment is a struggle for you, include the due dates for each bill on the budget as a reminder. Paying your bills on time saves you money on fees and avoids future credit problems.

Money Tracking

The personal budget helps you track where your money goes each month. Understanding where your money goes allows you to make changes. This is particularly useful for if you are struggling to pay bills. Review your budget to figure out where you can make cuts. This allows you to find a better balance between your income and the amount of money that goes out each month. For more accurate money tracking, save all of your receipts throughout the month and compare them with the amounts you allotted for each category in the budget. If you designated $75 for eating out but actually spent $150 at restaurants, you learn where you are blowing the budget.

Controlled Spending

A budget keeps spending under control when you follow the budget. This benefit of budgeting is helpful if you tend to overspend and end up short at the end of the month. By designating spending limits on extras like clothing and entertainment, you avoid overspending. If you struggle to stay within those spending limits in the budget, withdraw cash for each of the categories for the month. When the cash is gone, you wait until the following month to make any purchases in that category. For example, if you spend your clothing budget by the 10th of the month, skip the clothing store until the next month starts.

Reaching Financial Goals

Financial goals vary from person to person. One person aims to get out of debt while another works toward saving the equivalent of three months' salary. No matter where you are financially, setting money goals helps you get to a better place financially. The budget helps you achieve those goals. If paying off debt is your goal, the budget helps you identify extra money you can use to pay down the debt faster. For savings goals, a budget lays out how much you should put into your savings account each month.

References

• Consumer Credit Counseling Service of Orange County: The Importance of Budgeting
• CNN Money: The Dubious Joys of Budgets