The word “budget” has a bad reputation. It conjures up images of repression and refusal. It’s often scapegoated as the reason we’re unable to have fun, forcing us to stay home from that happy hour get-together or say no to that latest purchase we’re just dying to make. We perceive budgets as these malicious external forces that seize control of our money and leave us no agency in determining its use.
This shouldn’t be the case. Budgets aren’t constricting; they’re the biggest, most effective tool that we have when it comes to managing our finances. It doesn’t matter if you make $20,000/year or $200,000/year, a budget will help you examine how you can most effectively utilize your income and put yourself on the path towards achieving your goals.
Too often, we focus on what we believe our budgets take away, creating a mental roadblock between us and our financial peace of mind. To get past this, we must instead learn to examine what budgets are able to give, for their benefits are plentiful. While all of these benefits provide lengthy and worthwhile answers to the question “why budget?”, I’m going to focus here on what I believe are the three biggest gifts budgets can grant us.
Budgets give you INFORMATION
If I were to ask you how much money you brought in last year, would you be able to answer? How about if I asked you how much money you spent? For many, the answer to these questions would be “no,” but for budgeters, the answer is often a resounding “yes!” And that’s because budgets can provide a detailed, comprehensive look at your finances.
At its most basic, a budget is effective when it tracks how much money you have coming in (your income) and how much money you have going out (your expenses). These pieces of information can determine a lot about your financial situation. Are you spending more than you’re earning? If you have money left over, where is it going? Which expenses are the largest? How much are you spending on your needs versus your wants? Learning to analyze and understand this information is the first step towards financial control.
Budgets give you ENCOURAGEMENT
When you’re budgeting, you are telling your money where to go, not the other way around. Whether you’re interested in saving up a cash cushion to have on hand in case of emergencies, money to use throughout the holiday season so you aren’t tempted to turn towards debt, or enough funds to cover an elaborate Hawaiian vacation, your budget exists to help make that happen.
Just as it serves as a record of your spending habits, your budget also serves as a tracker of your financial goals. As you continuously evaluate your expenses and how you distribute any money allocated for saving or debt payoff, you will have a clear understanding of how you’re progressing towards those goals. And as you see those savings balance increase, you may become even more motivated to keep them rising.
Budgets give you CONFIDENCE
This is perhaps the most important thing that a budget can do: it makes you feel in control. When it comes to your money, there are few things more demoralizing than feeling as if you have no say in how it’s utilized, or watching it drained away on the debts and bills that pile up month after month. When you begin budgeting, you’re taking the first steps away from this cycle; the more you understand your financial habits, the easier it is to begin altering them so that big changes can come your way.
Creating and sticking to a budget is key to your financial success not only because it provides a blueprint for how you will spend your money, but also because it makes it evident that controlling your finances is possible. This newfound confidence will only propel you to make more responsible financial decisions in the future.
There are many, many advantages to budgeting beyond these three, but even if there weren’t, the message is clear: if you want information about where your money is going, if you want encouragement that will refine your financial journey, if you want the confidence of being in control of your finances, a budget is the very best place to start.
Big City, Small Budget 