I’ve written dozens of times, as have many others, about the importance of having a budget. But as they say at football games, “after further review,” I’ve changed my mind a bit.
The problem with budgeting
Budgeting has a bad rap and for good reason. It isn’t any fun. It’s time consuming. It’s hard to stay on a budget. And it can be depressing. These are the reasons z. They start saving for retirement, concentrate on paying off debt or leap into the stock market without really understanding their financial situation.
How much is coming in, how much is going out
The basic fact is that it’s important to know how much money you have coming in and where it needs to go. This is really the only way to see how you could pay off debt, save money or invest, and it’s nearly impossible to know this without a budget.
Budgeting is more important for some people
Budgeting is a good idea for everyone. But there are some people who need it more than others. For example, if you’ve never created a budget before, you should do so now as it’s almost guaranteed to improve your finances. You’re likely to see stuff you spent money on that you never noticed – a lot of small “budget leaks.” It you create a budget, you’ll be able to spot these leaks and control them.
Do you know your net worth?
Do you know whether your net worth is increasing each month? If not, you definitely need a budget to track your finances. Your net worth should be growing each month and if it isn’t, a budget will help.
If you feel you’re not being paid enough
A budget can tell you if you’re being paid enough to cover your expenses and have money left over to invest or save. If you work in an industry where image is important, you may find you’ll need to make certain sacrifices to maintain that image. And only a budget can help you do that.
If you can’t predict your income
If you work on commission or some other job where there’s not a steady paycheck, you need a budget with a very conservative starting point. It could also help you put aside money during the boom times so you’ll be able to get through the times when things get lean.
When you’re changing careers
If you’re in the middle of changing careers you may not be able to count on the same salary. If you have a budget, you’ll know your required expenses and how much money you need after taxes to pay for them, which could help you do a better job of evaluating job opportunities.
If your life will be changing
Are you about to get married or have your first child? Or maybe you’re going through a divorce. In any of these cases, you’ll be faced with new financial realities. You may have more or fewer dependents and more or less income. A budget can help you make the necessary adjustments in your spending so that you avoid getting into financial trouble.
A fresh look
While these situations make it more important to have a budget, it’s really a good idea for everyone to budget. With today’s technology, you could use a mobile application, a software program or do it the old-fashioned way with pen and paper. But regardless of which of these methods you choose, having a budget will help you take a fresh look at your finances and plan your spending so you can become financially independent.
