No matter how you feel about money, it shapes and impacts every aspect of your personal and professional life. Whether you run a household, a small business, or both, how you organize, spend, and manage your finances is crucial to achieving success (whatever success means to you). Though there are several financial practices you should implement, creating and following a budget are at the core.
What Is A Budget And Why Do I Need One?
A budget is a financial record of income and expenses. It’s an essential tool used by individuals and businesses alike to keep track of finances and manage households and companies more efficiently. Although you may believe you have a handle on your money matters, here’s a look at how having a budget can prove advantageous.
- Reaching Goals – Do you have short or long-term goals you’d like to achieve that require you to have a large sum of cash? Maybe you want to purchase a car, put a down payment on a house, invest in new technology, or expand your business. Having a budget can help you accomplish those goals. By creating a line item to save a designated amount of money, you’re encouraged to set cash aside until you reach your desired goal.
- Finding Extra Money – After working hard to earn a paycheck or generate revenue, it would be nice to have some money left over to spend at your discretion. You can take the family out to eat or get your home office painted. Budgets can help you eliminate or reduce unnecessary spending, ultimately, freeing up cash you didn’t realize you had.
- Handle Emergencies – In life and business, things arise unexpectedly that require your immediate attention. Unfortunately, resolving these issues often means having access to a large sum of money. Whether it’s bad plumbing or repairing office equipment, handling the emergency sooner rather than later is ideal. Incorporating emergency savings into your budget ensures you have money to handle problems before they get out of hand.
- Build Better Credit – It may come as a surprise, but having a budget can help you build better credit. Budgets ensure that you have enough money each month to pay your bills on time. They also help you free up cash, which you can apply to your outstanding debts. When you use budgets along with other financial management products like a credit builder card, the changes in your payment history, debt-to-income ratio, and credit utilization rates improve, increasing your credit score.
Three Budgeting Hacks To Live By
Creating and sticking to a budget aren’t the easiest things to accomplish. There are so many different methods to consider. Not to mention hectic lifestyles and other obligations make it easy to put out of your mind. Luckily, there are tips and tricks to overcoming these challenges. Below are three budgeting hacks to live by.
- Use What Works For You – Although there are plenty of methods, platforms, applications, and software for budgeting, use what works best for you. Take advantage of free mediums and trials to familiarize yourself with budgeting programs and their features. If you prefer the old-fashioned pen and paper or excel spreadsheet, there are also templates you can try. Entrepreneurs may find that it’s more efficient to hire or outsource to an accountant.
- Online Banking Tools – Many banks offer free financial management tools to account holders. For instance, Pockets are a feature for ONE account holders that enable them to divide funds into designated categories like spending, saving, groceries, gas, and more. Such tools make it easier to only spend what’s available and stay on track with bills and more.
- Review And Adjust – No matter which method you find most efficient for budgeting, it won’t work unless you work it. Analyze whether your systems are working, make changes to income and expenses as they arise, check for unnecessary spending, increase savings as it becomes available, and add new goals periodically for optimal financial management.
Keeping up with your finances is a multi-faceted task. As your needs and circumstances change, so does the way you use and manage money. Budgets are an essential tool to make your job easier. It gives you an accurate account of your income and expenses, enabling you to cover your bills, increase your savings, reach goals, improve your credit, and build a brighter future. Use the budgeting hacks listed above to see significant improvements in your personal and professional life.
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