Are you getting into budgeting for the first time? Have you been budgeting for a long time and feel like there is no purpose? If either of this conditions applies to you, you may be wondering what the purpose of a budget really is. It is a common question to ask and there’s no reason to feel bad about asking the question. Even though we have already talked about how to set up a budget and what it does for you, I thought I would take this chance to explain the three reasons why budgeting is important. Understanding the purpose behind budgeting is important because it is the only way that you will stay motivated enough to keep doing it.
Understand Your Expenses
The first reason why you should be budgeting is to monitor your spending. Having a budget in place means first and foremost that you are tracking your expenses. It is important to do so because you never know when you will encounter an unexpected increase or hidden fee. Also, not paying attention to your expenses is the key element for those who are struggling with debt. If you want to be debt free, than you should start with understanding your expenses.
Limit Your Spending
Another reason why you should be budgeting is to limit your spending. While understanding your expenses may be the first step in budgeting and an important reason to do so, it is best when that information is used to curb your spending. Controlling your spending is easily accomplished when you know how much you are spending in each category.
Stay Disciplined with Your Finances
Last, but certainly not least, is the reason to stay active in managing your finances. One of the biggest mistakes young families make with their finances is not paying close attention or losing interest. This often leads not only to excessive consumer debt, but also delaying retirement investing. This not only has detrimental results financially, but encourages young people to put off financial responsibility. Taking control of your finances while you are young is important because it sets a precedent for later in life.
If you are questioning the importance of budgeting, make sure to remind yourself the reasons that you are doing it. It is not only important for you, but it will help your children learn financial lessons as they grow up.