A carpenter uses a set of house plans to build a house. If he didn’t the bathroom might get overlooked altogether.
Rocket Scientists would never begin construction on a new booster rocket without a detailed set of design specifications.
Yet most of us go blindly out into the world without an inkling of an idea about finances and with no plan at all.
Not very smart of us, is it?
Why is Budget Important?
A money plan is called a budget, and it is crucial to get us to our desired financial goals.
Without a plan, we will drift without direction and end up marooned on a distant financial reef.
If you have a spouse or a significant other, make this budget together. Sit down and figure out what your joint financial goals are… long-term and short-term.
How Budgets Are Used in Planning?
Then plan your route to get to those goals. Every journey begins with one step, and the first step to attaining your goals is to make a realistic budget that both of you can live with.
A budget should never be a financial starvation diet. That won’t work for the long haul. Make reasonable allocations for food, clothing, shelter, utilities, and insurance, and set aside a reasonable amount for entertainment and the occasional luxury item. Savings should always come first before any spending.
Even a small amount saved will help you reach your long-term and short-term financial goals. You can find many budget forms on the internet. Just use any search engine you choose and type in “free budget forms”.
You’ll get lots of hits. Print one out and work on it with your spouse or significant other. Both of you will need to be happy so and feel like its something you can stick to.
How Budgets are Helpful in Decision-Making?
You say you know where your money goes, and you don’t need it all written down to keep up with it? I issue you this challenge. Keep track of every penny you spend for one month, and I mean every penny.
You will be shocked at what the itty-bitty expenses add up to. Take the total you spent on just one unnecessary item for the month, multiply it by 12 for months in a year and multiply the result by 5 to represent 5 years.
That is how much you could have saved AND drawn interest in in just five years. That, my friend, is the very reason all of us need a budget.
Examples of Budget
If we can get control of the small expenses that really don’t matter to the overall scheme of our lives, we can enjoy financial success.
The little things really do count. Cutting what you spend on lunch from five dollars a day to three dollars a day on every work day in a five day work week saves $10 a week… $40 a month… $480 a year… $2400 in five years….plus interest.
See what I mean… it really IS the little things and you still eat lunch everyday AND that was only one place to save money in your daily living without doing without one thing you really need. There are a lot of places to cut expenses if you look for them.
Set some specific long term and short term goals. There are no wrong answers here. If it’s important to you, then it’s important period.
If you want to be able to make a down payment on a house, start a college fund for your kids, buy a sports car, take a vacation to Aruba… anything… then that is your goal and your reason to get a handle on your financial situation now.