Importance of Budgets

Importance of Budgets

By: Connie Holt, E.A.
The Henssler Financial Group Position Paper

Want to achieve your goals in life? With many of your goals, success will be dependent upon monetary means. To be successful in reaching these goals, the basic starting point will be creating a budget and living within that budget.

Budgeting is a way of life and not a means of torture. We should put away the old myths of budgeting being a nightmare and develop a new attitude. Most of us go through school focused on a career or job training that teaches us how to earn money, yet gives us no training on how to spend money—wisely, that is. Once we are in the Real World we are surrounded by realities such as rent or a mortgage, groceries, children and endless bills. We would never assume that anyone could build a house—the carpentry, plumbing, electrical, etc., without ever learning how to read or draw a blueprint. Yet we do not receive the training on spending money wisely that we need to achieve success. We are expected to hit the Real World automatically knowing how to make it all work.

Why Budget?
A budget is the most effective financial management tool available to all of us. Whether you are earning thousands of dollars or hundreds of thousands of dollars annually, a budget is the most fundamental part of achieving your goals in life. It is extremely important to know how much money you have to spend and where you are spending it. There is an important distinction between creating a personal budget and deciding where to invest your extra income. A budget is the first step in maximizing the power of your money.

What do You Accomplish with a Budget?
Budgets are the foundation to your financial success. Once we are on our own and begin making, spending and investing money, budgets are our plan to guide us. Budgeting is about planning, which is crucial to produce a desired effect.

What is a Budget?
A budget is a money plan. With it, you can organize and control your financial resources, set and realize goals, and decide in advance how your money will work for you. A budget can be as simple as it is powerful. The basic idea behind budgeting is to save money up front for both known and unknown expenses.

Benefits of Budgeting

We know budgets can be important to helping us achieve financial success. Read on to discover the additional benefits you will reap from budgeting.

Knowledge. Personal budgeting allows you to know exactly how much money you have—even down to the penny, if you so desire. Furthermore, a budget is a self-education tool that shows you how your funds are allocated, how they are working for you, what your plans are for them, and how far along you are toward reaching your goals. Knowledge is power, and knowing about your money is the first step to controlling it. This leads us to our next benefit.

Control. A budget is the key to enable you to take charge of your finances. With a budget, you have the tools to decide exactly what will happen to your hard-earned money and when. You can be in control of your money, instead of having your money limit what you do. This bears repeating: You can be in control of your money, instead of letting it control you!

Organization. Even in its simplest form, a budget systematizes, or divides funds into categories of expenditures and savings. Beyond that, budgets can provide further organization by automatically providing records of all your monetary transactions. They can also provide the foundation for a simple filing system to organize bills, receipts and financial statements.

Communication. If you are married, have a family, or share money with anyone, having a budget that both or all of you create together is a key to resolving personal differences about money handling. The budget becomes a communication tool to discuss the priorities for where your money should be spent, and it allows all involved parties to "run" the system.

Opportunities. Knowing the exact state of your personal monetary affairs, and being in control of them, allows you to take advantage of opportunities that you might otherwise miss. Have you ever wondered if you could afford something? With a budget, you will never have to wonder again—you will know.

Save Time. All your financial transactions are automatically organized for tax time, for creditor questions, or for any query that may come up regarding how and when you spent money. Being armed with such information saves you time from digging through old records.

Extra Money. This will be everyone's favorite benefit: A budget will almost certainly produce extra money for you to do with as you wish. Hidden fees and lost interest paid to outsiders can be eliminated forever. Unnecessary expenditures, once identified, can be stripped out. Savings, even small ones, can be accumulated and made to work for you.