Why it is important to have a budget and stick to it
We cannot stress enough how extremely important it is to budget and not just so you can purchase that brand new car or keep up with the latest fashion trends but for more reasons than one. We have compiled our top 6 important reasons why it’s important to have a budget and stick to it.
Don’t forget to download our free budget spreadsheet template here and start saving today.
It helps prepare for rainy days
Life is full of unexpected surprises, some better than others. Take the COVID-19 pandemic as an example, no one (besides Bill Gates) predicted this one so when situations happen such as a global pandemic, job loss, unexpected illness or divorce to name a few, these situations can often leave you in financial turmoil. Therefore, it’s important to have savings ready for those not so sunny days because as life always goes, these emergencies tend to arise at the worst possible times. Don’t get caught out and make sure you include an “emergency fund” account when your budgeting.
We recommend that your emergency fund should consist of at least three to six months’ worth of living expenses, so you don’t spiral out of control when these unforeseen circumstances come to life. We understand it will take some time to build up 3 – 6 months’ worth of savings but even adding a small sum each week into this account will make the world of a difference.
It leads to a happier retirement
It’s important to keep the near future in mind but also crucial to remember the future beyond the horizon so you can live a comfortable and happy retirement. A budget can help you do just that. It’s important to build investment contributions into your budget. If you set aside a portion of your earnings each month and ensure you are on top of your superannuation, you’ll eventually build a nice nest egg. Although you may have to sacrifice a little now, you will certainly thank yourself down the track. After all, would you rather spend your retirement golfing and taking trips to the beach or working until your body won’t allow you to anymore? Exactly.
It will help keep your eye on the prize
A budget helps you figure out your long-term goals and work towards them, whether that be saving for a family, house or that dream holiday, sticking to a budget helps keep your eye on the prize whatever that may be. If you just move through life, living day by day, tossing money at every pretty shiny thing you want, how will you ever save enough money for those things you have always wanted?
A budget forces you to map out your goals, save your money, keep track of your progress, and make your dreams a reality. It’s especially important if you’re considering starting a family (or have one already), what expenses may arise such as school fees, medical bills and the list goes on.
OK, so it may hurt when you realize that the brand-new PlayStation game or the gorgeous dress in the shop window doesn’t fit into your budget. But when you remind yourself that you’re saving up for a new house, starting a family or a brand-new car, it will be much easier to turn around and walk out of the shop empty-handed.
It provides financial security and a guaranteed better sleep
There are many benefits to having financial security and not just that it will help you catch more shut-eye. Financial security refers to the peace of mind felt when we aren’t worried about money. The truth is you don’t need a mansion, expensive car, or designer label clothes to be financially secure – you don’t even need to have paid off your mortgage. Ultimately, financial security just means that you’re in control of your money, and you’re not worried about paying the bills or covering an emergency.
Think about it, how many nights have you tossed and turned or woken up in a sweat worrying you won’t be able to pay the bills or losing hours of sleep over financial issues? Don’t let money control you, by starting a budget and tracking your spending you are already on the right path to being financially secure and guaranteed to have better sleeping habits.
Mental health and financial security are strongly linked as financial security removes stress, fear, and anxiety, and replaces them with feelings of ease and safety. Experiencing a mental illness can cause financial strain and financial strain can lead to mental illness so it’s extremely important if it gets to this point to consult a specialist and meet with a financial planner to help get you on track. Don’t be overwhelmed by the process, there is so much help out there and you’re not in this alone.
It helps ensure you don’t spend money when you don’t have it
Far too many customers spend money they don’t have—and we owe it all to credit cards. The easiest advice we can give is just don’t get one but if you rely on a credit card then budgeting is more important than ever before.
Back in the day, people tended to know if they were living within their means. At the end of the month, if they had enough money left to pay the bills and stock some away in savings, they were on track. These days, people who overuse and abuse credit cards don’t always realize they’re overspending until they receive that credit card bill and realise, they’re drowning in debt.
Therefore, it’s important to create and stick to a budget, you’ll never find yourself in this scary position. You’ll know exactly how much money you earn, how much you can afford to spend each month and how much you need to save so you can set achievable goals for your future purchases. Sure, crunching numbers into an excel document and keeping track of every cent you spend isn’t nearly as much fun as going on a shameless shopping spree but it doesn’t mean it’s not important.
It creates cushioning so you can enjoy the finer things in life
Sipping cocktails in a tropical paradise, zipping around in a brand new car, moving into that dream home, everyone has different ideas of what’s considered ‘the finer things in life’ and budgeting can help you achieve just that. We always recommend when budgeting not to budget up to your eyeballs, it’s important you still allow yourself to have a “fun” account where you save money each week for activities, entertainments or new shiny toys because life doesn’t stop completely when your on a budget and it’s important to remember that.