8 Ways a Personal Budget Can Improve Your Lifestyle
Feeling overwhelmed? Get organized.
Most people think of a personal budget as something that drains all the fun out of life. Taken to an extreme, financial austerity could indeed make life seem bleak. However, a reasonable personal budget will help make life better over the long term. Once the habit of budgeting becomes ingrained, it makes having the lifestyle you want easier. Here are eight ways a personal budget will improve your life.
1. Helping You Save Time
Planning, and then sticking to a personal budget, makes you more informed because you know where your money is coming from and where it's going. You will know right away whether you have enough money for that night out or new pair of boots. An organized budget makes it less likely you'll lose important documents like your electric bill and have to scramble to find it. When you keep your budget and banking data in one place online, you'll save time that you can use for other things.
2. Preventing Panic and Guilt
We've all had that moment of panic when we realize the phone bill was due two days ago, and that sense of guilt from having to pay a late fee. A personal budget helps you develop the habit of paying your bills on time. Once you're paying your bills on time, the guilt from those $10 late fees goes away (and you'll still have that $10).
3. Showing You the "Fat" in Your Personal Budget
Tracking spending is the first step in creating a personal budget. Nobody likes doing this, because it shows in stark detail where all your money goes. Track your spending without judgment and without justifying those little extras. Remember that just about everyone is shocked when they track their actual spending, and that knowing where the "fat" is in your spending is the first step toward reducing mindless impulse purchases and money wasters.
4. Giving You a Sense of Accomplishment
If you keep your fingers crossed that hopefully you'll end the month with a positive bank balance, you can change that with a personal budget. Budgeting helps you prioritize spending and cut out waste, and the impact on your monthly bottom line can be very positive. It feels great knowing you paid all your monthly bills on time and still have money left over.
5. Helping You Obtain Better Borrowing Terms in the Future
A monthly personal budget establishes and maintains a good record of paying bills on time and in full, and over time this raises your credit score. A good credit score can save you tens of thousands of dollars if you choose to buy a home, because lending terms are better for those with better credit scores. A slightly lower interest rate over the course of a 30-year mortgage can save you a significant amount of money.
6. Making Coping With Emergencies Easier
If your car breaks down or your child breaks her arm, you will be under a lot of stress. At times like these, if your bills are paid and you have some money set aside for emergencies, you'll have much less stress than if you had to somehow find the money to pay for them. Ideally your personal budget should lead to six months' worth of living expenses set aside, but any savings is better than none.
7. Bringing You Closer to Major Life Goals
Realizing that you're dropping a couple thousand dollars on cigarettes or fancy coffee every year can be horrifying, but it can also be motivating. A personal budget that trims frivolous spending brings you closer to those big goals like paying off your car loan or saving up a down payment on a home. You don't have to cut all the fun out of your life, but when you identify and eliminate unnecessary spending, you bring your big goals closer to being achieved.
8. Letting You Control Money Rather Than Letting Money Control You
When your bills are a disorganized mess and you can't remember the last time you paid more than the minimum on your credit cards, your money controls you. When you have a reasonable personal budget that shows what you spend, and puts you on the path to keeping bills paid every month and eliminating debt, you control your money. When you're controlled by your cash flow, life is stressful and unpredictable, and one financial emergency can knock you out of the game completely. You don't have to be rich to be in control of your finances. Establish a personal budget and commit yourself to it, and you have greatly increased peace of mind. They don't sell that in any store.
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