Afshin Afsharnejad Explains The Importance of Budgeting

As being a financial management expert Afshin Afsharnejad says budgeting is so important because it helps you track your spending, save more money, and reach your goals faster. A budget also helps you make better financial decisions, get out of debt, and prepare for emergencies. By budgeting, you'll always have money for your needs and spend according to your priorities.

Did you know? Budgeting is one of the best things you can do to improve your financial situation.

If you’ve never budgeted your money or you think your finances are in pretty good shape, you might be questioning the importance of having a budget. Budgeting isn’t just for people who are struggling financially. No matter what your financial situation looks like, good or bad, everyone can benefit from having a budget.

Here's Top Reasons Budgeting Is Important

Living on a budget is one important principle of good money management. Budgeting is something that anyone can do to make their financial lives better. It’s not that hard, it doesn’t take that long, and the impact is immediate.

1. Put You in Control

Having a wallet full of maxed-out credit cards, having no savings, and not being sure if you can make rent is stressful and scary.

You can’t just ignore financial problems and hope they go away. You have to take control of your money rather than letting it control you. The first step in doing that is building a perfect result-driven budget.

If you’re not tracking your spending and budgeting your money, you’re probably wasting more money than you realize. Creating a budget will help you get your priorities in order, make sure you live within your means and get you back in control.

2. Help You Prepare for Emergencies

Life is full of surprises. Many of those surprises are really expensive.

In the past few years, we were blindsided by job loss, a significant unplanned home repair that our insurance wouldn’t cover, and elderly care expenses for an aging relative. We’ve found ourselves stuck on the side of the road thanks to an unseen pothole. We had to take one of our dogs to the vet in the middle of the night.

These things cost money. You might not have the money you need just lying around when an emergency hits.

If you’re not prepared, unexpected events can derail your finances and cause all kinds of stress. That’s why everyone needs an emergency fund.

3. Get You Out and Keep You Out of Debt

Spending money you don’t have by running up credit card balances is a sure path to financial ruin.

If you’re just making the minimum payments, you’re wasting way too much money on interest. If you’re ever late on your payments, the harsh late fees alone can set your payoff date back. Miss a payment and you can count on your card issuer raising your interest rate even higher.

If you’re not tracking your expenses and budgeting, plastic makes it too easy to overspend. You might not even realize how much trouble you’re in until the bills show up and you’re drowning in a sea of high-interest debt.

If you build and follow your budget, you won’t end up in this nightmare situation. You’ll know what you can and can’t afford. You can use your budget to incorporate saving for your wants rather than maxing out your cards and regretting it when the bills arrive.

If you’re already in debt, a budget will help you get rid of it faster. As you build your budget, look for things you can change or eliminate. Use any money you free up to put toward your debt.

4. Help You Meet Your Goals

No matter what your financial goals are, a budget is your roadmap for achieving them. You might want to go from renting a home to owning one, aggressively save money for your child’s education, or fund your retirement. Maybe you want to travel more or have the Christmas you’ve always wanted.

When you decide on a goal, you create a category for it in your budget. You funnel money toward it every month like you would any other expense. When you reach your goal, you can use the money you were putting toward the old goal to reach a new goal.

With a budget in place, the way you spend your money will match up with your financial goals. When you stick to your budget, your money will work for you even while you sleep. You’ll reach your targets over time.

5. Help You Cut Expenses

Once you figure out where all your money goes, it’s much easier to find ways to lower your expenses. You’ll probably identify plenty of things to stop buying to save money.

When we finally committed to creating and living on a budget and started reviewing our receipts, the amounts we were spending on certain things shocked us.

We saved $115 a month by cutting out cable TV entirely. We were paying for hundreds of channels, most of which we never watched. Between Netflix and Amazon Prime Video, we don’t feel deprived.

We drastically cut our food spending. Groceries and takeout were consuming an alarming percentage of our monthly spending. As a result, we got more strategic about food spending. Now we buy mostly sale items, use coupons, and cook at home a lot more.

There were some bad spending habits we identified and eliminated. Things like snacks and bottled drinks at gas stations, late fees, ATM fees, and lottery tickets.

When you set up your budget, you’ll find things you’re spending money on that you don’t need, don’t use, or don’t want anymore. Eliminate them from your budget.

6. Relieve Financial Stress

How many nights have you spent tossing and turning because you were worried about how you were going to pay the bills? I have spent more than a few sleepless nights wondering how we were going to get out of the mess we were in.

Financial stress can affect your physical and emotional well-being. Insomnia, depression, anxiety, relationship problems, anxiety, and weight gain or loss are all very real side effects of the stress that comes from money problems.

You might think you’ll feel better if you just avoid calls from creditors and ignore your billing statements. But denial and avoidance will only make things worse.

You need to face your financial problems head-on. You need a plan to help you take back control and move forward without the stress. Your budget is that plan.

When you budget your money, you’ll rest easier. Your situation might not be that great for now, but you’re regaining control and no longer overwhelmed.

You know how much you have coming in and where it goes. You can go to bed knowing that you have the money for your bills, you’re not overspending, and you’re working your way toward a better financial future.

7. Build a Saving Habit

When you’re not budgeting, it’s hard to prioritize saving and investing. Without a budget, you might completely overlook putting money aside and spend down to zero every time you get a paycheck.

Or you might figure you’ll save whatever you have left at the end of the month. But the amount you have leftover at the end of the month varies. Some months there might not be anything left at all.

When you have a budget, you can make sure you pay yourself first. You’ll create a budget category for savings and treat it like a bill. Every time you get paid, you’ll put money toward your savings.

It doesn’t matter if you save 10%, 20%, or a fixed dollar amount. The important thing is to consistently save a portion of your income. Budgeting ensures that you do that.

FINAL WORDS:

Budgeting puts you on the path to solving many of life’s financial difficulties. It doesn’t matter which budgeting technique you use, as long as you have a plan for your money you can follow. Budgeting isn’t just for people who are struggling financially. Budgeting can help you reach your financial goals, get you out of debt, prevent you from fighting with your partner about money, prepare you for emergencies, and more. If you’re not currently budgeting your money, today is the perfect day to start a budget.