Budgeting might not be the most exciting topic in the world but it’s important, and it’s really simple to do. Not to mention the host of benefits it can bring.
If you take some time to learn how to budget, you’ll end up with a good idea of your incoming finances versus your outgoings. You’ll know exactly how much you earn, how much you need to spend and what you have left over each month. Being financially aware like this has a number of benefits. We explore some unexpected ways budgeting could help you.
Get back on track
If you’ve been having some financial difficulties, a budget will help you regain control of your money. Understanding where you spend your money each month can be the first step to helping you spot areas you can save on. Not only that, but it will also help you allocate any spare money to debts that need paying off.
Keeping track of your budget doesn’t need to be complicated. You can just write it on a piece of paper or create a basic spreadsheet. The key to improving your money management and sticking to it is to keep it simple. If it takes too much of your time or is difficult to understand you’re unlikely to want to continue for long.
Avoid debt problems
A budget will give you a clear picture of what you can and can’t afford. Knowing the amount of disposable income you have available each month will stop you taking on more commitments than you can manage.
Stop wasting money
By analysing what you spend your money on each month, you’ll probably realise you’re spending more than you thought on unnecessary items. Small but regular spending on things like takeaway coffees or sandwiches all add up. For example, if you normally spend £5 a day on a shop-bought lunch, taking a packed lunch into work could save you £100 a month.
When you’ve been budgeting for a while, you might notice that you’re spending more than you want to on regular expenses such as utility bills, your mobile phone, or car insurance. Knowing when your financial contracts are due to renew will give you a chance to shop around for a better deal. Speak to your current providers to see if they can offer you a better rate or look at switching energy suppliers every year - it’s an easy way to save money.
Prepare for emergencies
It’s always good to have some money set aside for emergencies such as vehicle repairs, a burst water pipe, or an unexpected vet bill. Budgeting will allow you to decide how much you can afford to save each month. If the coronavirus pandemic has taught us anything, it’s that it pays to be prepared for the unexpected.
Keep your eye on the goal
Being able to see your budget in black and white will help you understand your overall financial situation. This will help you to stay focused on your financial goals, whether that is to save for a special occasion like a wedding, to settle a debt, or buy a property. A budget will also let you work out when you can expect to meet your savings goal.
Read on to learn about the 50 20 30 rule for simple budgeting.
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