Budgeting is something we’re taught about from a young age – and for good reason. It’s essential for leading a life where we can embrace financial autonomy. On this post, let us talk about the reasons why budgeting is so important and the strategies you can do to budget effectively.
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What is Budgeting?
Budgeting involves calculating how much you need to save or earn over a set period before spending it. It’s about finding a balance with your income and ongoings and involves a plan that you stick to.
An example of budgeting is following the 50:30:20 rule, where your money is split between needs, wants and savings. There has been more emphasis on budgeting and saving in light of the cost of living crisis too.
Typically, people will use budgeting over a set time period. For example, you might be saving up for a holiday or for a new home. If you budget correctly, this means you can build a pot of money over time. Once you have the strategy in place, it’s a case of sticking to it before securing your reward at the end.
Both individuals and businesses use budgeting for various purposes. You can set up your own budgeting strategy by using an online budget planning tool. Some people may choose to budget and save in a way that simultaneously boosts their credit score. It’s worth taking the time to assess your options when looking at savings accounts and more. It’s all about finding an option that works well for your lifestyle and circumstances.
Why Budgeting is so Important
In short, budgeting gives you greater control and autonomy over your finances. It means you’ll adopt good habits where you’re saving frequently.
Budgeting allows you to save money that can be used for long-term saving goals and can help us build savings we can fall back on in an emergency.
It means that if you’re faced with unexpected costs, as has been experienced during the cost of living crisis, you’ll feel more stable and less reliant on taking out loans or sourcing additional finance from elsewhere. You might have to replace your car unexpectedly or your rent might increase significantly.
Budgeting helps you refrain from overspending and keeps you accountable so that you only spend what you can afford. It allows you to siphon those essential costs somewhere safe so that you’ll always be covered for bills. In the meantime, you have a calculated pit of money that you can spend on more desirable purchases that you want, rather than need.
In the meantime, you can take comfort in knowing that your family and other dependents are secure, which will prevent you from feeling stressed. Feeling financially secure does wonders for your mental wellbeing so it’s hugely important for this reason.
