The Importance of Budgeting
A budget can seem lame, boring and time-consuming. However, budgeting is one of the most important skills you can ever learn. Learning how to have a strong financial future is the best way to success.
What is a budget?
A budget is an estimate of expected income and expenditures throughout a set period of time. A budget often provides the best means for planning your financial future. These budgets can be short term. But they can also be for your monthly expenses or even yearly expenses. Budgets help you make smart choices and develop a better understanding of finances and how they work.
What does a budget look like?
A budget can be anything from a note on your smartphone to a well-prepared spreadsheet. Here’s an example: Total Income: $2,400
- Rent: $1,000
- Utilities (Electric, water, trash, internet) $250
- Phone: $100
- Food: $250
- Subscriptions $100
- Shopping: $50
- Health Insurance: $200
- Transportation $100
- Savings: $350
When you make a budget you want to break these into categories. You’ll want to have exact bill costs for those things you can and rough estimates for those you can’t.
Should I save money?
YES! Saving money each month is paramount to your future financial well being. We know that budgets can get tight. But do you really need that Chinese food every other night? Do you really need to go out with your friends and party every weekend? Saving money is important for a few reasons.
Emergency funds are just that. For emergencies ONLY. Not a vacation, Not to pay off a credit card and certainly not so you can go out with your friends. An emergency fund is specifically for Emergencies. Unexpected hospital visits, Emergency car problems. These are all acceptable reasons to break that piggy bank and dip into that emergency fund. You should have 3-6 months of your salary saved in an emergency fund before you consider going on vacations or buying anything luxurious.
Saving for retirement is an important task. There are tons of ways to save. Roth IRA’s and 401(K)’s 403B’s and many others. If you don’t save for retirement how can you expect to retire?