If you haven’t gotten around to budgeting or are inconsistent with creating and following one, you may want to think twice.
The simple guidelines of a budget offer pathways to financial goals that can be difficult to achieve without them. A budget is a pretty simple tool, after all–mostly a way of tracking what money comes into your life and where and how much goes out.
Once you get a clear snapshot of your income and expenses, you can then direct your money purposefully and carefully toward the things you need and the things you want. Many big goals, from taking a vacation, buying a car or purchasing a home or preparing for retirement or kids’ college, require forethought and planning.
A budget is your tool to make all of these goals happen. Without one, you can face serious financial consequences, such as the following six.
You Might Amass More Debt
A budget is a guide to your income and expenses, but also a way to keep yourself honest and prepared. Without guidelines, it’s easy to let debts accumulate. Many people will only pay the minimum allowed on a credit card because it puts it out of mind. Without a budget, you won’t have an easy time carving out extra money to pay down your debts and could even go further into debt.
It’s Harder To Save
Without a clear picture of your finances, you are likely missing out on opportunities to save money, even just a little every month, toward financial goals. A budget shows you where you can cut back on some expenses in order to put money away toward such things as retirement, emergency fund or vacations.
You’ll Struggle To Meet Financial Goals
Without a budget, all of your financial goals are purely theoretical. A budget is the first step to putting aside money toward the important things you need to save for. Without those guidelines, you might not discover where you’re spending money and may even be saving it in ways that aren’t optimal.
Budgeting takes the guesswork out of how much you can spend on any given category. For example, if you’ve worked it out in your budget that you can only afford to order dinner out once a week (or once a month), then you’ll have an easier time sticking to this. Without a budget, spending can become random, and it’s easy to overspend.
Unexpected Expenses Can Throw You
Another perk of budgeting is that you can set money aside for unexpected expenses that don’t come regularly, from yearly payments to unexpected repairs or emergencies. A budget allows you to carve out money every month for just those circumstances. Without one, such expenses can completely throw you off your financial game or put you behind.
You Won’t Be Prepared For Emergencies
One of the most important pieces of financial advice from financial experts is to have an emergency fund. This fund can be for things as simple as an appliance repair and as big as being laid off from a job. Without a budget, you’ll have a hard time knowing how much you can realistically save toward this cause and less likely to do so.
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