When you want to ensure you’re on top of your finances and making progress towards reaching your financial goals, having an accurate budget in place is essential. Good budgeting may take time, but it allows you to manage your money more successfully. You know where every penny is going and can make adjustments as needed, for instance if you needed to have more money available to do something like pay down debt.
At Consolidated Credit Solutions we have the financial resources you need to become an expert at building a budget that will help you reach your financial goals. If you have questions about budgeting or how to better budget your money, or you need help creating a budget that will allow you to get more out of your financial life, give us a call at 1-800-990-9838.
Why is good budgeting so important?
While you may think you can just keep everything straight in your head or guesstimate on how much money you have, budgeting is vital for a healthy financial outlook. It helps you avoid spending beyond your means, keeps you on track for paying down debt or building your savings, and enables you to reach long-term financial goals. Research shows when you know where your money goes, you are more responsible with your spending because you’re more aware of how every dollar needs to be spent.
Without accurate monthly budgeting, you are more likely to overspend on expenses, such as food and clothes. You’re also more likely to impulse buy in stores. All of this means you are more likely to run out of money before the end of the month or risk being late with a payment on a bill because you didn’t have the funds available. In addition, you are less likely to have money left over for building your savings or setting aside money for things like retirement or kids’ college funds.
Is good budgeting just about keeping track of expenses?
Tracking expenses and setting limits on spending are just two factors in budgeting. Good budgeting also involves calculating if you have too much debt and need to pay some debts off. It also involves setting aside money for building your savings, planning for retirement, and even investing for your future when you get your finances in good working order.
In general, you should be setting aside roughly 15% of your monthly take-home income to put into savings or planning for the future. Experts agree you should have at least $1,000 set aside in a savings account in case of emergencies, such as a trip to the ER. Once you have that rainy day fund savings in place, the money you save can be put towards things like contributing to a retirement account, building a college fund, or investing to improve your financial situation.
Budgeting also allows you to ensure that you’re not carrying too much debt and putting your finances at risk. If you aren’t budgeting the right way, you can easily mistake breaking even every month for being on top of your finances. One unforeseen expense can then send your finances spiraling out of control. With just one late credit card payment, a much steeper penalty APR can be applied to your credit card and suddenly you don’t have control of your debt.
In general you want to have less than 36% of your monthly take-home (net) income dedicated to paying monthly bills on your debts. You can use a debt-to-income ratio calculator to make sure you don’t have too much debt. This way, you can be more confident that financial hardship isn’t looming just over the horizon.
Need help creating an accurate monthly budget? Budgeting doesn’t have to be complicated and the right budget can help you avoid financial difficulty and reach your financial goals. Learn our easy 5-step system for creating an accurate monthly budget that will help get you where you need to go.
Whether you need money to pay off debt, you want more money to put towards retirement, or you just need to save for an upcoming family vacation, freeing up more money in your monthly budget can help you reach your financial goals. Get tips on budgeting to save more money so you are better equipped to get where you need to go.