Why Budgets Matter
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Why Budgets Matter
Budgets don’t have to be complicated. Even the simplest guidelines around spending can make the difference between financial solvency and getting into too much debt. People who make and stick to budgets tend to have more savings, less debt, and to feel better about their financial situations. Creating a budget is a worthwhile endeavor no matter what your financial situation is—even the very wealthy, who would seem to be the last people who would need a spending plan, create and stick to budgets.
Things To Know
- Even a simple budget can help pave the way to financial success.
- Budgeting involves creating a plan so that expenses match income.
- Even wealthy people craft budgets as a way to ensure they don’t spend too much.
Simple budgeting is worthwhile
Without a budget, it is all too easy not to have any idea how much money you and your family are spending and where that money is going. And without some idea of what you are spending money on, from a mortgage payment to groceries to utilities to day care, you risk running out of money before all your bills are paid.
Budgeting is no more and no less than creating some kind of plan so that what you spend equals what you make or what you and your spouse or partner make. When you budget, you take a look at any income you have that comes in, which could include any salary you or your partner make from working, and other income, which might include child support or alimony.
Then you look at your expenses and do your best to ensure that what you spend doesn’t exceed your income. Ideally, your spending should be less than your income so you have money to save for emergencies, retirement and other life goals. But even if that isn’t the case at first, creating a simple budget is the first step.
Creating a budget and sticking to it gives you the ability to come out ahead financially. By knowing what you spend money on and matching your expenses with your income, you’ll gain financial security and the emotional security of knowing that you can meet your financial obligations.
Even rich people have budgets
People of every income group can benefit from budgeting. That’s why many wealthy people track their spending and create and stick to budgets.
In this respect, wealthy people aren’t any different from you or me. They want to be able to meet their financial goals and unless they know what they are spending and how their income is being deployed, they are at risk of spending more than their income and not meeting those financial goals.
A wealthy person’s budget is going to be similar to the budget of someone who doesn’t make very much money. They may have more bills, and those bills are likely to be larger, but expenses are expenses, and for a rich person to save any money, they must also spend less than their income. Otherwise, they will get into debt and may end up having financial problems.
