subject: Why is creating a personal budget critical to your financial future? [print this page] Why is creating a personal budget critical to your financial future?
Creating a personal budget is critical to your financial future because having a rough idea of what bills need to be paid and when, is simply not enough. Creating a personal budget is important because a clear plan allows you to evaluate your income and expenses to see if you're spending more money than you're making. Failing to create a budget that accounts for all you're spending may cause you to live beyond your means and eventually end up in debt. Are you convinced that you need to be creating a personal budget and do you know how to go about it? Some people desire to but procrastinate.
Here are some common excuses for not budgetinghave you ever used one of them?
"I've tried creating a personal budget but I never seem to follow through."
"I don't plan on going into debt so I really don't need to learn about creating a personal budget."
"I don't make a lot of money and don't have many bills so I don't really need to know anything about creating a personal budget. Besides, I don't spend that much anyway."
Let's start with "I've tried creating a personal budget but... ". The issue here is discipline; one thing I've learned in life is the disciplined will rule the undisciplined. You have to discipline yourself to follow through. Is your financial state important to you? If so, begin by spending 5-10mins at the end of each day making note of money spent, where and comparing it to your budget. It is easier to remember and track this way. Without creating personal a budget, it's very easy for money to slip through your hands unnoticed and unaccounted for. Creating a personal budget is vital to your present and future success.
For instance,
If you're currently working full-time for minimum wage in Ontario, that's $10.20 X 40hrs/week = roughly $20,000/year. If you've been working for the last 5 years, you've made about $100,000. Where is all that money? Can you account for it? Not having a budget is a recipe for disaster.
As for the claim that "I don't plan on going into debt anyway," no one ever plans on going into debt, it just happens, trust me. Ever heard of the saying "when you fail to plan, you're planning to fail"? Creating a personal budget allows you to see where you currently stand and to take stock of how much is needed to get by every year, month, week, etc., and then compare it to how much money you're actually making. If there is a shortfall between your income and your expenses, it forces you to take a critical look at your expenses and look for where cutbacks can be made. Without creating a personal budget, it is easy to miss this discrepancy and easily reach out for credit cards to cover the shortfall.
And for the reasoning of, "I don't make a lot of money/I don't spend much anyway," not having a lot of money or only having a few bills is not an excuse for failing to create a budget. Bills always start out as a "few" but if care is not taken, they mount up; just like small problems become big problems when they are ignored. The issue is not how much money you make, it's how you manage what you do make. It is very naive to think that once you start making more money, you'll start creating a personal budget and learn to save. It won't happen. If you haven't learned to manage small amounts of money, you won't be able to manage large amounts of money. We are creatures of habit and no matter how old you are, you need to start developing what I call "good money habits.". Whatever habits you've developed over the years have gotten you to where you are now; do you want to keep going in this direction? If not, you need to change your habits because if they could have gotten you more, you would already have more. The first step in changing those habits is creating a personal budget.
So let's re-cap. To be financially secure and not end up knee-high in debt like the average consumer, you need to live within or better yet beneath your means. Exercise discipline, learn good money habits and get started by creating a personal budget.
