If you’re new to the world of personal finance, you may not know the benefits of budgeting. Budgeting is one of the most important financial tools available to you.
The benefits of budgeting are vast. Although, if you bring up budgeting to most people, they will roll their eyes and sign in disgust.
Unfortunately, budgeting is avoided by adults like a 15-year-old avoids a sink full of dishes. Sure, you know it needs done, but who really wants to do it?
Well, the benefits of budgeting far outweigh any perceived constraints, and I’m going to prove it to you!
What Is A Budget
Before we really dive into the advantages of budgeting, we quickly address what is a budget.
A budget is a financial plan. There are many methods to budgeting but on a general scale… it’s planning for your income, expenses, and savings.
For example, a budget includes:
- Your income
- Your complete list of expenses
- Your expense due dates
- Tracking of all spending
That’s it. Pretty simple right?
There are a few methods to budgeting as well
Zero-based budgeting is planning and accounting for every penny in your account. If you have an income of $1,000, you’ll plan to spend or save the entire $1,000.
There are no limits on how much you can save or spend, you’ll adjust the budget to meet your specific needs.
Caution: Don’t actually take your bank account to $0. This is terrible financial advice… because things happen and you don’t want to over-draft your account in the name of budgeting.
Leave a buffer in your account. For example, we always leave $100 in our account. I budget down to the $100 mark every pay period and, if something happens, I have a small safety net to catch our budgeting misstep.
Another popular budgeting method is the 50/30/20 budgeting plan.
In this plan, you’ll have a general outline for how much money you should spend on needs, wants and savings.
The plan breaks down like this:
- 50% Needs
- 30% Wants
- 20% Savings
I’m not quite sold on spending that much money on wants, but I think this is a great starting place for anyone looking for tips on budgeting for beginners.
Another popular method of creating a budget is the 80/20 method. The 80/20 concept is popular in the world of dieting. You eat clean and healthy foods 80% of the time, and other… more tasty foods 20% of the time.
Much like dieting, in this method, you’ll automatically save 20% of your money and live off the remaining 80%. If you’re currently not saving any money, this is a massive improvement!
Saving 20% of your income is a huge win!
Ok, so… now let’s talk about the benefits of budgeting!
100% Control of Your Money
When you create and stick to a budget, you take complete control of your money. You know the when, where, and why of every penny you spend. Every. Single. Penny.
I’ve never built a house, but I’d assume if you were going to build a home, you’d have a blueprint. That blueprint would detail every inch of the structure, and it would ensure the build is successful.
Budgeting is the blueprint to your financial success. It gives you total vision and control of your finances. Financial surprises and over-drafting your bank account will drastically decrease with a plan.
For us, an unplanned side-effect to correctly budgeting was accountability. For years, my wife and I struggled to stick to our budget. We’d plan our expenses, but we didn’t track our spending.
Therefore our budget failed… a lot.
When we began to not only create a budget, but track our spending every day… our success exponentially increased.
Budgeting guarantees financial accountability.
This is a massive advantage of budgeting. If you’re creating, tracking, and sticking to a budget, you can’t use the excuse of “I didn’t know”.
Will mistakes happen? Yes. Absolutely, but you’ll know exactly what happened and you can ensure it doesn’t happen again.
Plan and track every penny, every month. The discipline of budgeting will free you financially.
Decrease Financial Anxiety
Another one of my favorite benefits of budgeting is decreased financial anxiety. I have enough to be anxious about, so I really don’t need to add another brick to my chest.
Worrying about money is both terrible and common. In fact, 44% of adults stated that money was their most dominant form of stress.
If you’re not sure where your money is going, it’s really easy to spend a lot of time worrying about it. The whole “out of sight, out of mind” adage doesn’t apply to your money… trust me.
Budgeting will help to eliminate your financial anxiety. You’ll know where your money is going and exactly how much cash you’ll have
There’s something really comforting about a well written plan.
Similar to anxiety, fighting about money is unfortunately incredibly common. It’s the second leading cause for divorce! Budgeting will help to eliminate fighting and stress about money.
If both partners are on board with the household budget you’ll fight less about money. You’ll have fewer miscommunications and your home’s finances become a joint effort.
My wife and I used to argue about money. It was mainly because our communication around money was atrocious. We each would spend what we wanted as if our bank account was a bottomless pit of wealth.
It wasn’t, and we’d over-draft the account often. This then leads to arguments about “who was spending money”. It turns out, we both were spending money…
Once we discussed our budget, agreed to track our spending, and talk about money routinely, we rarely (if ever) fought over it again.
Treat your home like a business and partner up. You might be surprised at how much fun it can be!
Plug Your Money Leaks
Without a budget, you’re going to leak money. I know this from personal experience!
A money leak is a small amount of money that you spend and don’t notice. For example, any $10 – $20 impulse purchases you make that
We had way too many money leaks. Family Dollar, Dollar Tree, dining out, monthly subscriptions… and more.
At the end of the month, these added up to hundreds of unplanned dollars!
Budgeting will plug these money leaks quickly! You’ll be less likely to spend that $20 if you have a well-written plan for the money.
Small money leaks can sink your financial ship, but you can quickly plug those leaks with a budget.
Cut Unnecessary Expenses
Did you know that 80% of gym memberships are paid for and unused each month! A recent study showed that the average American has 11 reoccurring charges each month.
Even if they’re “only” $15… that’s $165 a month, or $1,980 a year! Whoa…
Things like Netflix, Hulu, GoDaddy, monthly subscription boxes, gym memberships, and many more.
These monthly subscriptions become difficult to track as the numbers increase. Each month, the payment quietly sneaks out of your account and into their pocket.
The benefits of budgeting really shine here. As you plan your budget and scrutinize your bank statement, you’ll identify these sneaky monthly subscriptions and cut out the unnecessary expenses.
Get this awesome monthly budget planner!!
Give Yourself A Raise
Most people who complete and stick to a written budget state a huge advantage to budgeting is actually having more money.
It’s not that they received a pay increase at work, but they realize how much money they were losing to unplanned spending!
When you plug your money leaks, cut unnecessary expenses, and track your spending, you’ll quickly realize you have a lot more money every month than you knew.
Our budget eventually freed up almost 3,000 a month!! I’m not kidding… Budgeting saved us $2,900 a month.
Your budget will make you feel rich, and that’s a sweet feeling!
Save Money On Groceries
Saving money on groceries is an indirect advantage of budgeting. It happens organically and without a direct focus on grocery shopping.
How often do you buy food, and then throw it away because it’s spoiled? I know we used to waste a lot of food, and it’s embarrassing to think about.
We were stuck in this wasteful cycle before we started budgeting:
- Go grocery shopping without a plan
- Buy hundreds of dollars worth of groceries
- Go out to eat constantly
- Groceries spoil and get thrown out
- Rinse & Repeat
Budgeting will help you track your monthly grocery spending and ensure you’re not wasting money on groceries that spoil because you’re going out to eat all the time.
Saving money on groceries was a delightful advantage to budgeting. We now cook more at home and feel healthier!
Best of all, we don’t have to buy new food to replace the spoiled food we didn’t eat. Throwing food away feels both morally and financially wrong.
Stop Living Paycheck to Paycheck
80% of Americans are living paycheck to paycheck. Struggling to make ends meet, and anxiously waiting for payday.
It may be a quick transition for some, and slower for others, but it will happen. Planning and tracking your spending will allow you to find extra money in your budget each month, build your savings, and break the cycle.
Stop waiting for payday and start planning your spending every day. Budgeting will put you in control!
Become Debt Free
We paid off over $109,000 in consumer debt and I attribute the majority of that success to budgeting. For us, the benefits of budgeting compounded each time we paid off a loan.
Without budgeting, I don’t believe we would have ever become debt free. We’d still be buried in debt and living paycheck to paycheck.
Use your budget to identify extra money that can be thrown at your debt. Pay off each debt and continue to snowball those payments until you’re completely debt free!
If you’re still on the fence, add up all of your monthly loan payments. What could you do with that money? How would that cash change your life?
Build An Emergency Fund
Just last week my wife’s Jeep Patriot died… Well, the transmission died and the cost of replacing it is more than the Jeep is worth. (Womp Womp)
We knew the car was getting older. It has over 157,000 miles and has been nickel and diming us for a while.
Now that it’s dead, we need to replace it… and having an emergency fund is critical to our ability to maintain our sanity and remain debt free during this stressful time.
Building this emergency fund was another one of the benefits of budgeting. We were able to build a plan around saving money into our budget.
Stocking up your emergency fund is critical to your financial health, because things… like a car breaking down…happen. You’re going to have to pay for it, and having an emergency fund will make those times far less stressful.
Create Sinking Funds
Budgeting will allow you to save money for pending expenses. That’s exactly what a sinking fund is. It’s a fund saved for a specific purpose. It can be anything… from vacations to home remodeling plans.
Are you planning to replace your washing machine next year? Great. You have 12 months to save up that money.
If you’re paid bi-weekly, that’s 26 paychecks to save up for the pending expense. An advantage of budgeting is planning for future expenses and making the saving relatively painless.
For example: If you know you’ll need $600 for a washing machine in a year, you can set aside $23.08 per paycheck (26 x $23.08 = $600.08).
$23.08 per pay will be far less painful than coming up with an unplanned $600!
Creating a sinking fund line item in your budget will make pending expense far less painless, and will prevent you from breaking out the credit card.
Guilt Free Fun
Imagine… You’re sitting on the beach, sun kissing your face, and warm water washing over your toes. You lean back in your beach chair, close your eyes and think “how the hell am I going to pay for this”…
Sounds terrible, right?
Vacations and entertainment are less stressful when they’re paid for in full. Budgeting for your next trip will ensure you’re not stressing about money while your family is building sandcastles.
You owe it to your family to be both physically and mentally present when you’re together. Creating a budget and planning for your next vacation in advance will ensure you’re financially ready to take that next trip!
Even if you’re not taking a vacation, budgeting in entertainment expenses is important. Not planning for that date night can completely wreck your budget, and cause further issues at home.
Stop feeling guilty for having fun and plan for it in your budget!
Achieve Financial Independence
I know we’ve talked about many benefits of budgeting, but true financial independence is one that can’t be left out.
After becoming debt free, we set our sights on true financial independence. Not worrying about payday, or if our jobs will be eliminated is a peace of mind few people have.
We want that… badly. Budgeting has taken us from living a life buried in debt, living paycheck to paycheck, to a
All on two Registered Nurse salaries.
We continue to budget and save for retirement, and you can do this too… but, you must create and stick to your budget!
Realize What Matters Most
The last benefit of budgeting is the ability to realize what really matters the most to you. When you’re planning your spending, you’ll quickly weed out the unnecessary items and make room for anything you truly value.
You’ll develop a respect for what you own and you’ll care more about what you buy. Budgeting will put the price of items into a new and unique perspective.
Sure, that random item might only cost a few hundred dollars, but how much of your time will you need to work to pay it off? Is it worth it?
Budgeting helped my wife and I realize what we really cared about and we stopped buying arbitrary possessions to build a fake sense of happiness.
Happiness, we learned, was time together.
Maybe that’s really the most important advantage to budgeting… Loving what you own and appreciating the priceless things in your life.
Benefits Of Budgeting Final Word
Holy moly, we’ve covered a lot of budgeting ground today! Budgeting changed our lives… I know that’s a big, flashy statement… but it’s true.
Without budgeting we would still be deeply in debt, living for payday, and arguing over money. Budgeting freed us from the financial burden that accompanies debt.
I’m sure there are more benefits to budgeting, but you don’t have time for more today! You’ve got a budget to create!!
If you’re interested in budgeting printables to help you along the way, check these out!