Why Do You Need to Know How to Budget?
Creating a Budget: Why It’s Essential
Setting up a budget is one of the best things you can do for your household finances. Once you’ve set your financial goals and priorities, the next logical step is to learn how to manage your money. Before you even think about investing, you need to establish a budget. Why? Because having all the income in the world won’t make you wealthy if you’re spending more than you earn.
The Importance of Budgeting
A budget keeps your spending in check, much like a diet keeps your eating habits in line. It gives you a framework to measure how well you’re managing your money and helps you spot trouble before it happens. Every successful business operates with a budget, which is why they hire financial managers to ensure they stay profitable. If a financial manager presented a budget where a company spends more than it makes with no plan for return, they wouldn’t last long in their job. Similarly, a company wouldn’t survive long operating at a loss.
Common Pitfalls in Budgeting
The truth is, many of us fail at budgeting for the same reason diets or exercise routines fail: they’re often unrealistic. Saying you’ll only spend a certain amount of money each month, knowing full well it’s unlikely, sets you up for failure. We tend to create plans that are hard to stick to. Have you ever found yourself or your partner saying, “I don’t know how, but I’m over my budget again this month”? It’s likely not about the spending but rather the lack of effective planning.
A solid budget starts with one key piece of information: your past expenses.
Next Steps in Budgeting
1. **How to Budget – Introduction**
2. **Step 1 – Where Does All My Money Go?**
3. **Step 2 – Income Vs Expense**
4. **Step 3 – Take It All The Way to 12 Months**
5. **Step 4 – Add In Those Special Times**
6. **Step 5 – Apply the Formula for Success**
7. **Step 6 – Adding In Your Investment Goals**
8. **Step 7 – Sticking to the Plan!**
9. **Making It Easy with Mint**
10. **Download My Excel Template**
