Budgeting sets the foundation of every personal finances plan.
You might be living paycheck to paycheck or earning six-figures a year, either way, you need to know where your money is going. Having a strong financial plan is crucial if you want to have a good grip on your finances.
Unlike what you might think, budgeting isn’t all about restricting what you spend money on and cutting out all the fun in your life.
Budgeting is really about understanding and controlling how much money you have and where it is being spent. By doing so, you will already be miles ahead of most people in the personal finances game.
In simple terms, budgeting is the process of creating a plan to spend your money. Budgeting is planning how to allocate those funds best.
Why is Budgeting so Important?
Creating this spending plan allows you to know in advance whether you will have enough money to do the things you want. If you don’t have enough money to do everything you would like to do, then you can use this planning process to prioritize your spending and focus your money on the things that are most important to you.
Following a budget or spending plan will also keep you out of debt or help you work your way out of debt if you are currently in debt.
The Basic Budgeting Tip Everyone Should Know
Divide your income among needs, wants, savings and debt repayment, using the 50/30/20 budget. You can read more about it in the articles below.