Budgeting often gets a bad rap. Sure, creating and maintaining a budget might feel like a hassle sometimes. They can be time-consuming, restricting, and can even feel self-defeating on occasion. Yet, there is no better way to ensure your financial well-being than through a well-maintained budget.

Some perks of budgeting are obvious, such as helping you achieve financial goals and avoid costly debt. But did you know that using a budget regularly can also improve your level of happiness? 

Review the following six reasons why a budget is crucial to your financial health. 

1. Know Where Your Money Goes

One of the most basic yet important reasons a budget is essential is to know where your money goes each month. If you fail to track your expenses, it can be challenging to get ahead financially. Whether you’re saving for a specific goal or want to break free from credit card debt, understanding how you spend your money is critical.

Antoine de Saint- Exupéry’s famous line says it best, “A goal without a plan is just a wish.” A budget not only provides the framework to organize your money, but it allows you to easily identify areas you can cut back.

2. Eliminate Frivolous Spending

Impulse purchases are the quickest way to derail your financial plans. Yet, everyone makes them. From the unplanned weekend getaway to the impromptu lunch-break shopping spree - and don’t forget the dozens of items not on your grocery list that still end up in your cart.

Frivolous spending, no matter how small, adds up quickly. But you don’t have to let these expenses throw your finances off track. Instead, include spending money or fun money in your monthly budget. These spontaneous purchases are much more enjoyable when you’re prepared for them - and don’t have to deal with the fiscal consequences later.

3. Break Free from Credit Card Debt

The ability to buy just about anything, anytime, anywhere, makes credit cards one of the most popular payment methods today. It’s also not surprising that credit card debt is one of the leading causes of financial troubles for people. 

Budgeting can help defeat never-ending credit card debt in two ways:

• Identifying and planning for your recurring monthly expenses like rent, utilities, food, and gas with a budget can help you reduce your reliance on credit cards.

• A realistic budget will help you put aside money so that you can begin repaying your outstanding credit card balances more aggressively. 

4. Build Your Savings

When your finances are disorganized, saving money can be extremely difficult. Every time you try to put money aside, you realize you forgot that the electric bill or car payment is due. By the time you reach the end of the month, there is very little money left over.

A budget allows you to prepare for all your recurring expenses ahead of time. This organization makes it much easier to save because:

• You know precisely how much money will be available after your monthly expenses.

• You can automate the savings process through payroll deductions or automatic transfers.

• You can put money aside at the beginning of the month, eliminating the temptation to spend the money frivolously. 

5. Identify If You’re Living Beyond Your Means

Creating a budget can be an eye-opening experience for people. Once you log all your monthly incomes and itemize every expense, you might find there’s no money left to put into savings. Or worse, you’re operating in the negative – meaning you’re relying on credit cards or other loans to keep you afloat.

Ideally, everyone should aim to put 10% to 15% of their take-home pay into savings. If you’re unable to meet those thresholds, it’s time to rework your budget. This is the part of budgeting that can be disheartening. But a little wake-up call is a good thing if it helps you right your finances and get back on fiscal track. 

Reexamine your budget and identify expenses you can cut. Also, try to identify your spending habits and triggers that cause you to spend. For example, many people shop out of boredom or to relieve stress. Simple lifestyle changes could lead to significant financial improvements.

6. Improve Your Mental Health

Most people don’t think of increasing their happiness level through budgeting. However, creating and maintaining a budget can lead to two significant mental health benefits:

Financial Stress: 

Being financially disorganized can lead to unwanted stress and anxiety. From being unsure whether you can pay your monthly bills or cover an unplanned expense to postponing fiscal goals because of a lack of savings – money matters can weigh heavily on people. 

Rest & Relaxation:

At the other end of the spectrum, maintaining a proper budget can do more than just reduce stress. When your finances are organized, and you’re actively saving money, you can put funds aside for rest and relaxation. Whether it’s a rejuvenating massage or a weekend getaway with friends, a budget can provide the stress-free, guilt-free retreat you need to recharge and enjoy life.

Quick Tips for Creating & Maintaining a Budget

Following a budget can lead to many significant financial benefits. And while there are many types of budgets and ways to track your money, the best advice is to keep it simple. Here are a few tips to help you create and maintain a realistic budget.

• Use a spreadsheet to create a budget for the entire year. It helps to see how specific expenses affect your finances over the course of a year vs. a month. A year-long view also helps to plan for one-off expenses, such as birthdays, holidays, and vacations.

• Review several months of account and credit card statements to identify all your recurring expenses and spending habits.

• Monitor your spending regularly through online and mobile banking.

• Schedule a time on your calendar each month to balance your budget and make any necessary adjustments.

We’re Here to Help!

Budgeting is the gateway to financial success. Making it a habit to review and balance your budget regularly is an excellent way to save more money and improve your overall well-being. 

If you have questions about budgeting or want to review the various savings and investment accounts available to you as a member, we’re ready to help. Please stop by any of our convenient branch locations or call 248-322-9800 ext. 5  to speak with a team member today.  

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