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10 Horrible Facts About Budgeting you need to know

facts about budgeting

While you may already know why budgeting is important, you need to realize that there are facts about budgeting that would change your life for the better.

Going out is fun, and spending is amazing, but what about budgeting?

When faced with the idea of budgeting, it often seems like a tactic sent to punish us. Some of us feign deliberate ignorance and fail to plan financially. It is important to realize that even when you spend less than you earn, budgeting is absolutely important.

This involves strategically mapping out how you intend to spend your money, thereby balancing your expenses with your income.  But then, what are those facts about budgeting that would help you spend wisely, and prioritize your money to work for you?

So, here we go…

1). Creating a Budget Can Be Emotional

Handling money can make you feel emotional. You get anxious about making more, having less or spending too much. To make the best of yourself, you need to be honest about your unique weaknesses and how to make them work for you.

While doing this, do not judge yourself but try to relax your nerves. You must concentrate on taking a logical route in everything you do. That way, you gain a clear direction of where you are going.

2). Begin with Your Fixed Expenses

These types of expenses are usually constant in price and value for a period of time. This includes your house rent, car installment payment, and utility bills.

Occasionally, there may be an urgent need to maintain your house or car but that should not be captured in the fixed expenses unless they keep recurring. Ensure you make these payments on automatic mode, so you never make the mistake of missing out on these payments.

Read more: 10 common pitfalls of budgeting to look out for 

3). Consider that there are things you can’t overlook

Oftentimes, we might close our eyes to the fact that we need to plan “spending money” for eating out with friends or going out for the occasional dinner.

So, when it isn’t already planned, we end up spending too much unintended and unexplained money at the end of the month, which defeats the entire purpose of a budget.

Creating an appropriate plan for your recurring expenses is an amazing way to budget your spending. For example, eating out with friends, buying groceries, and clothing, and even embarking on trips are costs that cannot be easily determined. Just as the name says, these types of expenses are not constant every month. They fluctuate based on times and seasons. However, planning for them would transform your budget into a living thing that works for you.

4) Clothes and travel sometimes take a lot more than they should

You will never believe you spend so much on both fashion wear and traveling throughout the year. However, when you break the costs down to monthly expenses, it may be quite small but when you calculate it for a whole year, you’ll discover you are spending a lot. Most people are heavily addicted to buying the latest fashion wear and also traveling around the world either for pleasure or for business, and this costs a lot. Creating a budget in this area can help control your spending rate.

Read more: How to spring clean your finances in simple steps.

5) Your budget might work better if you had a separate account for non-fixed expenses

One of the best facts about budgeting is that you can either make or break the process of budgeting. For instance, we earlier talked about how non-fixed expenses require planning.

But still, if you are having problems, then create a separate account for it, as this will give you a clue about your spending rate.

If you try this trick several months ahead, you will certainly have an idea of what you are not sure about, as it will help you further investigate your spending habits.

6). Budget Makes You Accountable for Loans and Debts to Pay

One of your fixed expenses could be a loan you have been struggling to pay off. You may not necessarily add your housing loan here, as they serve as your rent and transport expenses.

So, knowing that you have outstanding debts to clear will help you decide what to spend on and how to save some money.

7). Automate your savings

To ensure proper budgeting for your expenses, you can adopt creating fixed savings. For example, you can approach your bank and request an automatic transfer of a specific sum directly to your savings account.

However, you can decide to make a non-fixed amount of transfer. It depends on what works for you. Doing this every month will help you have a healthy financial plan for your monthly or yearly expenses.

8). Budgeting Can Help You Prepare for Retirement

Talking about money and retirement, it is certain that you will one day retire after your prime days of hustling and bustling. When this happens, how will you meet up with your expenses?

Well, creating a budget will give you a clear idea of what you should spend on and how much savings you need to cover those expenses. Before you do this, I will recommend you consult a financial planner to help you do the math. This is where you will have to consider factors like taxes, market forces, and any possible inflation. You should know that at retirement, you don’t rely on any income to get groceries, or finance your travel. Rather, all your accumulated savings for the years you were working will bail you out. This is the reason you need to create a budget ahead for times like this.

9). Emergency is still an important task

There are certain expenses that may not be captured in your budget because they don’t always happen. But this does not mean you should not prepare for them.

For instance, what if your car breaks down, or you suddenly get out of your job or have to deal with unforeseen hospital bills? These are all the reasons why you need an emergency fund.

Consider saving at least 3 months of funds to help prepare for such events and you may not have to break the bank should these events happen.

10). Prioritize debt to make your budget work for you

Perhaps, you have multiple debts to pay. Then you need a realistic plan of how to pay for it, which is why you need a budget. In fact, budgeting is considered the most underrated tool of debt management.

But once you plan and prioritize the debts you need to pay, you will stop being overwhelmed about how much debt you have to pay and start solving the problem.

11). Your budget is never fixed in stone

One of the biggest facts about budgeting is that your life is always filled with newer experiences. Hence your budget requires that you update it every month or three months. While updating, consider checking out how your non-fixed expenses have changed and whether it was worth it. Hence, you will have a better understanding of what you always spend on every month, and make better money moves.

Overall, perhaps one of the most vital facts about budgeting is that you need to budget to grow financially. As we already know, our needs are insatiable and may change from one minute to the next. Hence you can make the best of your life, and develop better money habits and financial plans to maintain your desired lifestyle.

 

 

 

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