One of the most important elements of your financial portfolio, is your monthly budget. A monthly budget has many advantages, not the least of which is financial freedom and contentment. Who would not want those two commodities; something money CAN’T buy?

So, let us have a look at some reasons why a budget is important and what advantages a well thought out “money plan” has for your life:

  • Govern Your Spending

When you don’t have a budget that helps you to control your spending, it is very easy to spend money beyond your means.  You might not intentionally overspend but if you don’t have a plan to guide you, you won’t even realize that you are. A cappuccino here and a burger there and very soon you will be on that “end-of-the-month salty crack snack” by the middle of the month. A budget will help you stay in the safety of spending only what you have.

  • Realise Financial Goals

Setting goals is not hard or terribly complicated, but achieving the goals we set, that can hardly be accomplished without careful planning and diligent execution of that plan.  That applies to financial goals too. A carefully planned budget and vigilant execution will help you to attain realistic financial goals that you have set. Every time you sit down to record your spending, you are essentially recommitting to those goals.

  • Protect Yourself from Dissatisfaction

Trying to “keep up with the Joneses” is a very dangerous way to live that anyone can easily plunge in to. We are bombarded with messages like “you need this” and “buy this to be happy”. Every time you sit down to create, assess, refine, or log spending into your budget, you are making a conscious effort to focus on your own finances. This will help you to stay focused on your own financial progress and deter you from comparing yourself with others.

  • Free from the Debt Bog (A bog is another word for a swamp/quagmire)

If one of your financial goals is freedom from debt, we salute you! Financial success and progress can only come when you stop spending money on things you can’t afford. When you are constantly using your income to pay for things that you couldn’t afford in the first place (debt) you can hardly move forward towards financial freedom. That’s why budgeting is so important. It can help you get out of debt, or plan your finances so that you can save and pay cash for big purchases and avoid debt in the first place.

  • Financial Organisation

Benjamin Franklin said “For every minute spent organising, an hour is earned”… If you had to draw that truth into your finances, how rich would you be? Having a budget is a good start to being financially organised and keeping to it will help you to stay on top of bills, installments, debt payments and the like. Without a budget things are likely to slip through the cracks and one can end up in hot water.

  • Be Ready for the Unexpected

Life is full of unexpected twists and turns and some of them have unexpected financial implications. A good budget will have a “saving for a rainy day” section and you will be in the habit of saving money for those life-emergencies. Imagine having 3-6 months’ worth of living expenses in your savings account; that would certainly buffer you from an unforeseen storm.

  • Saving as a Lifestyle

One of the most rewarding consequences of careful financial planning is becoming a person who’s lifestyle is characterized by saving. Not just saving-up to buy that new pair of jeans, but habitually saving money. When you start living on a budget, you can eliminate bad spending habits and debt. You can be accountable to your budgetary goals and start moving forward in actual financial prosperity – money in the bank!

So, why is it important to have a monthly budget? Apart from the advantages of realising goals, being organised and being ready for the unexpected?  Living by a budget will help you to live more free and unencumbered than you could imagine. 

Red Dot Now provides accounting, payroll and tax compliance services using the best of breed online technology.

Should you want to discuss this or any of their services further, contact Ryan Coates on e-mail at ryan@reddotnow.com