Information is brought to you by our partner, GreenPath Financial Wellness
Making a budget and following it are two powerful financial habits. It’s not always easy, or fun at first. But it is one of the best steps you can take to successfully manage your finances. There are many reasons to budget and in the long run, it feels really good to see yourself accomplishing a goal.
Reasons to Budget (There's more Pros than Cons)
#1 – A budget helps you gain control of your finances
Think of a budget as a financial roadmap. It will guide you to your destination. It will also reduce arguments and improve relationships because you and your family will know where you are going financially, providing a smoother ride along the way.
#2 – Budgeting helps you achieve goals
Whether it is putting money aside for emergencies, a vacation or a college education, a budget helps you devote resources to those things that you determine are most important. Having a plan also promotes well-being and reduces stress.
#3 – A good budget keeps you honest
Documenting purchases allows you to figure out where your money is going. It allows you to stay accountable to your goals. By keeping a budget, each dollar you spend is accounted for. That’s a powerful incentive to stay true to your good intentions.
#4 – Budgeting helps improve habits
If you spend more than you earn, you will drain your savings. And if it continues, you will take on debt. By measuring how you spend your money, you will know for sure whether you’re headed for trouble, and you can take the steps necessary to improve your habits.
#5 – Budgeting helps you avoid debt and improve credit
By truly understanding how much it costs to be you, you can make adjustments to stop living from paycheck to paycheck. You may be able to identify ways to get out of debt and stay out of debt. By paying your bills on time and not taking on too much debt, you will take the most important step toward building good credit.
Use Greenpath's Budgeting worksheet to calculate your monthly expenses and income to get an idea of what you have to work with, what your commitments are, and what they have remaining to devote to their goals.