I think it’s fair to assume that most people start budgeting because they want to get control of their spending, and save more money. But, how does budgeting help you save money?
Budgeting helps you save money by controlling your expenses and eliminating wasteful spending. Additionally, since budgeting requires you to plan your finances ahead of time, you can save money without worrying if you will have enough left over for your living expenses.
Though, to be honest, there are many different ways that budgeting can help you save money. And, if you stick with me, that’s exactly what I’m about to cover.
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Budgeting Keeps You Organized
Above all else, budgeting helps you organize your financial life. And that in and of itself can be the difference-maker when it comes to saving money.
Think about it, if you aren’t sure how much money you make and spend each month, how do you know how much money you will be able to save?
Budgeting gets everything out into the open, and adds all sorts of clarity to your financial life.
Budgeting Helps You Prioritize Saving
If you plan out every expense you will have for the next month, you can also feel confident about putting money into savings the moment you receive your paycheck.
If you’ve heard of the concept of ‘paying yourself first’, this is what it means. And it is the key to saving money. Here at Be The Budget, we call it saving before you spend.
Here’s how it works.
When you get a paycheck — whether you are an employee or a business owner — you just enter the income into your budget. Then, you decide how much money you want to save, and actually move the money into savings. After that, you use the remaining amount of money to pay for your living expenses and recreation; which is where your budget really shines.
Using your budget, you can plan out your expenses to the penny, and fit your lifestyle to accommodate your savings. (As opposed to the approach of saving whatever money is leftover after a month of spending.) Whereas, without a budget, you are much more likely to overspend, and dip back into your savings.
By budgeting, you are able to place a priority on saving, and do it before you ever spend a penny.
Budgeting Keeps You Focused On Your Financial Goals
Here at Be The Budget, we often talk about the importance of setting inspiring financial goals. But, you can set all the financial goals you want, but if you don’t plan how you’re going to achieve them, and constantly check your progress, then you probably won’t achieve them.
That’s why budgeting is so important. A budget acts as a plan and a progress tracker. Every month, if you know how much money you need to save in order to stay on track for your financial goals, all you have to do is set your budget to ensure you achieve it.
Additionally, each time you log your expenses into your budget, you are essentially, reminding yourself to stay focused on your goals.
Budgeting keeps you focused on your goals, and motivated to save more money so that you can achieve them.
Budgeting Helps You Identify Wasteful Spending
As I mentioned at the beginning of this article, budgeting helps you eliminate any wasteful spending in your financial life. Whether that means identifying an unused subscription you have been paying for for the last year, or your tendency to overspend at a particular retail store.
When you budget, it’s nearly impossible for wasteful spending to remain a part of your financial life. So, you end up saving more money.
Budgeting Helps You Improve Your Net Worth
One of the biggest revelations I had when I first started budgeting, was that it helped me track and improve my net worth.
You see, when you are checking in on your budget every day, logging every expense, and updating your budget to better serve your financial goals, it becomes easy to plan your net worth.
In your mind, you will start to view every purchase through the lens of your financial future. You will begin to see the long-term effect of impulse spending. And after all is said and done, you will start to see your net worth improve.
Budgeting Keeps You On The Same Financial Page With Your Spouse
In marital finance, it is essential to be on the same page. And the best way to achieve that is to live according to a budget the both you and your spouse create together.
In fact, if you are currently struggling with finances in your marriage, I highly encourage you to get on a budget as soon as possible. This will help bring clarity to your financial life, and ease a lot of the financial tension.
Think about it like this. If you both create a budget together, you can’t get away with impulse spending. The budget holds you accountable, and since you agreed to the structure of the budget, it doesn’t make any sense to complain about it. Budgeting in marriage is the best way to get and stay on the same financial page.
And when you are, I’m betting you will save a lot more money.
Budgeting Helps You Reduce Impulse Spending
It might go without saying, but budgeting lessens your urge to spend money impulsively.
You see, when you are constantly keeping up with your spending, checking in with your financial goals, prioritizing saving, and staying on the same page as your spouse, the thought of spending money on an impulse becomes kind of disgusting.
I mean, after all your hard work in so many areas of life, it would be a bummer to just blow it on an expensive purchase. Budgeting keeps these purchases in perspective, and instead, keeps you focused on saving money.
Budgeting Helps You Plan For Big Expenses
Throughout life, there are all sorts of big expenses, and budgeting helps you save up for them. Whether you are saving for an emergency fund, a new car, a down payment on a house, a wedding, a vacation, or anything else, budgeting is the key.
Without a budget, expenses can go a little overboard, and actually end up hurting your savings.
If you need an example, just look at the wedding or the baby industry. If you are preparing for either one of those things, and you don’t have a budget, there are all sorts of expenses just waiting to ambush your bank account.
Budgeting keeps you in control when planning and spending on big expenses, so that you don’t end up harming your finances in the process.
Budgeting Helps You Eliminate Debt
Seriously, that’s why I started budgeting. You see, before my wife and I got married, we were buried in over $34,000 of debt and spending money without any regard to our financial future.
(It actually hurts me to think about how poorly I handled money back then.)
It wasn’t until we combined our finances as newlyweds and saw how little money we were actually saving, that we decided to change.
Fast forward a year and a half, and budgeting helped us pay off all our debt, save up a six month emergency fund, and start investing for our future.
Budgeting Helps You Stop Comparing Yourself To Others
One of the biggest pitfalls in all of personal finance is comparing yourself to others. You’ve probably heard this referred to as the “keeping up with the Jones’” syndrome.
There is just nothing good that comes from looking at somebody else’s financial life — or the life they are trying to portray — and trying to follow it.
The best thing you can do is to focus on improving your own income, cutting your own expenses, sticking to your own budget, increasing your own savings, and building your own net worth. And when you spend a lot of time doing that, it leaves little room to compare yourself to others.
For more on this subject, be sure to read our post: Finding Financial Contentment: The Secret To Building Wealth
Final Thoughts
Budgeting is such a critical aspect of handling your personal finances properly.
It can help you stay focused on your financial goals, stay financially organized, get on the same page with your spouse, and stop comparing yourself to others. Oh, and the better you get at it, the more budgeting will help you save money.
