Creating a budget is the first step towards any financial journey. Budgeting is one of the most important financial habits you can teach in your life. While creating an account is essential to help you plan how much money to save, spend, invest and give, it is equally important to track those expenses in an organised manner to make swift progress in your financial journey.
Create a Budget & Track Your Expenses on Wizely
While there is no fixed way to make a budget, some people make a calendar, while others do it the old school way with paper and pen.
Before going through why it is essential, let’s see what key components it should have.
- Your monthly income and expenses, you can afford.
- Categories of your expenses: Fixed, Discretionary and Savings or Investments.
- Areas where you can trim down to make sure you reach your financial goals in time.
Once you have the plan in line, make sure you track it frequently to check and adjust the grey areas until you have a budget that works best for you.
The most primary reason to create a budget is Financial Security. Irrespective of how much money you make, following a budget can help you save and spend your money wisely.
Know more about how to create a budget: How To Start Creating a Budget From Scratch
Still not convinced? Then here are six good reasons why you should create and stick to a budget.
- Helps in Long-Term Goals - A budget helps you drive your attention to your long term goals and the path to achieving them. Budget is the map to help you reach that international trip you have been waiting for, or the car you have been dreaming about. There will always be distractions where you would want to shift the focus, but when you remind yourself about your financial goals then it will be much easier to stop yourself from spending money.
- Keeps You Away from Debt - Far too many people spend their money on paying credit card bills. But when you make a budget and stick to it, then the eagerness to buy out of your pocket fades. With a budget, you will exactly know how much you earn and how much you can afford to spend.
- Keeps You Prepared for Rainy Days - Life is filled with surprises. But if you have a plan to stick to, you can save yourself from the mud on rainy days. It sure always feels like emergencies come in the worst times, but with a savings plan in hand, you can help yourself from the trouble for a little while. The emergency fund you create in your budget should at least be of six to seven months worth of your living expenses. This extra money will ensure that you don't spiral into the depths of debt after a life crisis.
- No More Bad Habits - If you start keeping track of how much money one spends on habits like smoking and drinking, you would be shocked. These habits do not only destroy our health but eat into our budgets as well. So, following a budget can actually keep you healthy!
- Happy Retirement - Spending your money with responsibility, good for you! But aren't you forgetting something? As important as it is to spend your money wisely today, saving is also critical for your future. A budget can help you do just that. With a proper budget, you can start contributing your savings to IRA or other retirement plans in your 20s itself! After all, would you rather spend your retirement golfing and taking trips to the beach or working as a greeter at the local grocery store to make ends meet? Exactly.
With a budget you can take the first step towards Financial Wellness and we at Wizely are committed to help you get started!