Disclosure: As an Amazon Associate I earn from qualifying purchases. Some of the links below may be affiliate which means if you click through I earn a small commission at no extra cost to you. To learn more check out my full disclaimer policy.
Budgeting can have a huge impact on your finances. And yet most people don’t budget.
People are scared of budgets for different things. Budgets seem restrictive. Some people are too lazy to budget. You can find even more reasons why people don’t budget in this post here.
No matter how scared you might be of budget you should still do it. Why? Because budgeting is important.
There are two big reason budgets are important. Reason #1 It makes you make intentional choices about where your money is going. And reason #2 it makes you track your spending.
Let take a closer look at reason #1, shall we?
It forces you to make intentional choices about where your money is going
Whew that a bit of a mouthful.
How much thought have you given today to how you’re going to spend your money. Do you plan where your money is going to go?
Most people don’t give that much thought to where their money is going. Sure they’ll cover the bills. And sometimes they might need to make hard decisions if they can’t afford something. But have you ever sat down with your paycheck before you spent it and made a plan?
That basically what budgeting your money is, making a plan.
When you make a plan for your money you start spending differently than someone who doesn’t have a plan.
A budget makes the trade-offs you’re making with your money a lot more real and present. And don’t kid yourself you are constantly making trades offs when it comes to your money.
If you choose to spend money on eating out that money is gone and can no longer go towards your vacation. You might not see that when you’re eating out. But you would feel it later if there is not enough money for a vacation.
When you budget you are making intentional choices about where your money is going. You decide whether it best to put money towards eating out or a vacation. And if you don’t want a vacation and would rather it out more it perfectly fine. As long as you are making intentional making that choice.
In fact, a large portion of personal finances is intentional making choices. We as humans want lots of things and we want it all now. Instant gratification. But the world doesn’t work that way.
We can have some things now. Or we can have other things later. It’s your choice based on your values.
It makes you track your spending
I think of that phase out of sight and out of mind when it comes to tracking your money. Have you ever look at how much you spend on things over a year? Do you have any idea of how much it would be?
Most people don’t. They buy things in the now. They can convince themselves this is a treat I don’t do this all the time. Or I deserve this after the bad day/week/month I ‘ve been having.
Maybe buying some things are a habit like buying lunch while at work. Or get a coffee every morning.
Once again there nothing wrong with spending lots of money on something. That is if you truly enjoy it and it makes you happy. If its something you do just because it might be worth the money your spending on it.
That why I like the spending reports in YNAB they show me the truth. Even when I don’t want to see it shows me the truth.
Becuase most of us aren’t aware of how much we spend on things in a month. Much less over a whole year.
That why tracking your spending is so important.
Over time it allows you to see your patterns and habits in your spending.
Some things I notice when looking at my spending over a year period is I spend on clothes in phases.
I like to think that I don’t spend that much money on clothes. Most months it not over $50. Which sounds great until you realize I buy lots of clothes twice a year. Once as we head into winter and once as we head into summer. In those months I easily spend $200 -$300 on clothes. That a lot more than $50 a month.
You might discover other things about yourself.
Something else that shocked me was I was spending $200 a month on gas with a ten minute commute. I knew jeeps used a lot of gas and weren’t fuel efficient. But it wasn’t until I saw how much I was spending on gas that it truly hit home.
At that time I was also looking for a new vehicle. Fuel efficiency factor into my decision of which vehicle to buy. Now with my current car, I spend around $100 on gas while driving more.
When you look at you spending on non-essentials things take a moment and think if they made you happy. You probably bought lots of things thinking they making you happy. But how many of them actually did make you happy?
I know that candy doesn’t make me happy but chocolate can. Going on vacation makes me happy. Buying knickknacks don’t make me happy.
You might not be able to make a list of things that make you happy. Think back to your 5 most recent purchases did any of those things make you happy? If the answer is none maybe adjust your spending.
Even if you not ready to fully commit to budgeting track your spending for a month or two. If you decide to start budgeting these numbers will help you when it comes to setting up your budget. In the meantime, it makes you more conscious of your spending.
There are of course other reasons to budget these two things. I wrote a post about it here. But these two things that make budgeting so important.
If you still on the fence about budgeting there a few things you should know. Budgets can be hard but they don’t have to be. You can personalize your budget to suit your lifestyle. Want to spend most of your money on food you can. Your budget should be about you.
In the end, your budget should help you reach your financial goals, force you to make an intentional decision and track your spending. That it that all. You don’t need to budget to save money if you don’t want to save money. Though it is always good to save money.
You don’t get what you don’t ask for so today I’m asking for you to share my post Why Budgets Are Important by pinning the image below. Thanks!