People have a misconception that life can become totally dull if you execute a personal budgeting plan. But in reality, living without a proper budget plan can be a pathetic experience, just like trotting the globe without a compass.
It is possible to live without planning a budget, but you might have to put a lot of hard work towards it. It will waste your precious funds too.
What we think about budgeting
As per the results of gallup.com's Annual Economy and Personal Finance survey, conducted on April 4-14, 2013, “Nearly one in three Americans prepare a detailed written or computerized household budget each month that tracks their income and expenses - a large majority do not. Slightly fewer Americans (30%) prepare a long-term financial plan outlining their savings and investment goals in detail.”
If you check statistical data, you'll see that most of the rich individuals have created their financial background through a strict budget.
Who's better at budgeting – WOMEN or MEN?
This brings to my mind the saying that behind every successful man there is a very smart woman. But does it happen at the time of budgeting?
Let's find out from the below-given chart:
|Controlled cash flow, spend less than monthly||51%||71%|
|Pay off credit card bills each month regularly||36%||61%|
|Pay bills on time each month||74%||90%|
|Have emergency fund to pay off bills for next few months||34%||53%|
|Have sound knowledge of stocks, bonds, and mutual funds||40%||70%|
|Confident about investments that they're allocated appropriately||24%||40%|
|Seek outside guidance during tough financial times||75%||25%|
How to improve living through personal budgeting
1. Save your precious time
If you make a proper plan and then stick to it for executing a personal budget, it will make you more aware of your financial situation. You can arrange your every future expenditure, starting from buying a pair of boots to booking a small trip to Miami. You will know how much money you can spend on your luxury. So, it can be said that by planning a budget, you can easily monitor your money from earning to spending.
Even you wouldn't lose vital documents when required. If your banking information and documents remain in one place, you can surely save a significant amount of your time to spend on other things.
2. Keep you secure from panicking and guilt
We all panic and feel guilty when we realize that in this current month, we forgot to pay our home loan instalment, or car loan payments or even electricity bills. But if we can follow some ways to build a healthy budget plan, it can help us to grow a habit of paying bills on time. Once you start to pay on time, that “late-fee guilt” will vanish like smoke.
3. Use as a financial roadmap
After getting the proper information, you can easily know the direction of your finances. When you find any error, by following your pre-planned budget, you can channel your finances in a different direction.
So, it is certain that you must mold your budget as a living document so that you can update it according to the changes in your personal life.
4. Point to the wastage
If you can budget properly, you’ll be able to compare the detailed report with the previous month’s expenditure. It will reveal the actual amount of wasted money. You can point out the source, where you have invested the money incorrectly.
If you spend money on some non-budgeted commodities, you'll surely encounter a shortage of funds. So, whenever you can locate that source, you can also rectify yourself.
5. Provide a better position to bargain with the creditors
If you pay your monthly bills properly and on time, it will increase your credit score. If your score increases, it will give you a better chance to bargain while taking out a mortgage or any unsecured loans. A good credit score can save you thousands if you are going to buy a home or car.
Whenever you plan your expenses, it will reduce your costs by cutting off the loose ends, which otherwise may lead to extra expenditure. A lower interest rate can save you a significant amount of money over the course of a 30-year mortgage.
Provide funds for emergencies
Budgeting becomes helpful when an emergency arises. It can be a car break down or may be an accident or any monetary loss. You might be under stress until you can find a way out from the problem. At that time if you know that you have saved enough to pay for your monthly bills for some months, it’ll give you some relief.
7. Accelerate towards future goals
Through budgeting, you can cut off an enormous amount of unnecessary expenses and save a good amount of money from your wallet.
It is very motivating for an individual as he/she can move forward to complete future goals for his family. It can bring you closer to fulfill those big goals, like funding college education for each child or paying off the home loan. However, it doesn't mean you have to remove all the excitement of your life. But, when you can recognize the unnecessary cost and cut them off, you can surely move forward toward your financial success.
8. Connect you with other people
Budgeting can help you connect with friends and family members. Planning a suitable budget and following it can encourage you to work as a team to reach common financial goals and help you to avoid money oriented conflicts.
Budgeting teaches family members how to spend money responsibly and maintain accountability.
9. Convert your funds into a tool
Budgeting every month can change your mindset toward FINANCE. Without thinking, you won’t even spend a PENNY. It will push you to reach financial goals and fulfill needs for everyone. A good amount of money can be helpful as an unavoidable utility tool for achieving your future goals.