An analyzed estimation of Expenses, Profits or Revenues for a timeline or a period is called a Budget. Specifically, a budget is prepared as a future planning or say, course of actions to be taken to achieve the desired revenue or expense.
A budget is created for a country, a state, company, organization, and for an individual too. The purpose varies too! This website, Capitalist Cabin, is all about Personal Finance and no personal finance lesson is complete without a mention of Budget. Therefore in this article, I’ll be talking about Personal Budget.
What is Personal Budget? Why do you need a Budget? And some bonus insights. I’ll be talking about all, one by one. You can refer to the table of contents for your preferences, however, it would be helpful if you read along every word of this article.
Table of Contents :-
What is a Personal Budget? And why do you need it?
Okay, let’s drive to your life insights first. You must have planned how to use your money. Where to use it, where to spend, to spend or not to spend, to save or invest? You must have come across such situations where you had to take difficult decisions in your life. And I know that such decisions are sometimes very hard to take.
In such complex times, what you need is a budget! A budget helps you tackle these, and it clears your mind about where to use which money.
Sometimes, life throws unmanageable and unpredictable events. It would be best if you were prepared for such events as they can happen at any point, most likely when you least expect them to happen. Therefore, not only does it become important to have a budget, it becomes a necessity.
A good personal budget will allow you to keep track of how much you earn, and how much you spend with ease. You don’t need some hard mathematics skills, neither do you need to refrain from spending your money on some wants and luxuries.
Yes, you should refrain from wasteful expense but enjoying a little is no crime! It is your money after all, and you’ve worked for it.
We are in the technological century, which means there are numerous budgeting applications available. Such applications track all your monetary incoming and outgoing. You, see? Creating a personal budget is simpler than ever.
This way, you’ll know where your money is going and at what percent. Now, won’t you be able to control your money habits after this? Of course, you will.
Building a Personal Budget and its benefits –
- A budget tracks your incoming money – income, royalty, grants, etc.
- It tracks down your expenses and eventually gives you a reading of where you spend and how much you spend.
- It can help you save more money, eventually clearing a debt and building an emergency fund for future scenarios.
- The saved money (with the help of budgeting) can help you start investing, funding your side hustle or business, which brings in more money.
- Rinse and repeat. With your dedication and discipline, it may help you build a fortune that you wouldn’t have thought of!
The last thing is – Stick to the Budget. Forever. Obviously, you can modify it over time. But stick to it. No matter what.
Is Personal Budget for an Individual only?
When I talk about you having a Personal Budget, it’s obviously meant for you only. But when you have just your expenses!
Your family, if you have one (you must have one!), come under your budget too. So, technically, your personal budget is meant for more than just one person. Your budget not only includes your expenses and savings, but it also includes and takes into account your responsibilities as the breadwinner of the family.
If you have a family of more than three or four members, then it doesn’t matter how much you earn. You might have used this phrase at least once – ‘Money is tight.’ or ‘I am tight on money.’ The purpose of creating a budget is also about not repeating this phrase ever again.
By now, you must have understood the importance and usage of a budget. In case you haven’t, stick around for a while. Because now, I’m going to bust some myths about budget not being useful and important.
Myths revolving around Budgeting –
There is no need for a Budget.
Some people only feel this way because they think that having and maintaining a budget takes a lot of effort. Truth be told, it’s the exact opposite. In fact, the availability of numerous phone and web applications makes it a lot easier to have a budget.
If your earnings disappear among your expenses and you don’t even get a chance to save, invest or simply enjoy your money, you need a budget.
A budget will help you track and cut down your extra and needless expenses. Now when you cut down your expense, you end up with more money. It’s all up to you whether you save, invest or spend on experiences!
My Maths is not strong.
I am weak at Maths too. Still, I have my budget sorted out for every month, and I barely have to do any calculation. My budgeting application installed on my phone does it all. You too have a smartphone, don’t you? Why not use it for some advantage?
You do not need to be good at maths at all. Modern budgeting apps, sheets do it all. Only one thing is required out of you – the discipline to start and keep moving forward. That’s it.
I have a secure job. No need to budget
Let me tell you very clearly, no one in this world is truly safe, let alone a job! It doesn’t matter if you have a government job or a private job. Your job is never secure, and neither are you. Anything can happen at any moment. A private company can collapse with its owner. The government may start firing people or may update policies because of which you will be fired. What if you meet an accident or fall sick to a point where you won’t be able to work?
You need to have a plan for every scenario. You need a budget to track expenses, save money, invest money. Such decisions will decide your fate in case of emergencies.
I do not want to get rich.
In case you do not have major goals or you don’t want to get rich, it is hard to spike some dedication for a budget. But that doesn’t mean you don’t need one!
I have talked enough about it in this article that you need a budget to track your money so that you can prepare for future unpredictability. You not having some ‘get rich’ goal doesn’t mean that fate won’t strike you.
You need to have some money and discipline to tackle difficult times, which are inevitable. Having a budget gives you both – The ability to save money and The taste of discipline.
I have no debt/loan
That’s perfect! It’s truly commendable that you are debt-free. But this doesn’t confirm that you’ll be so for the rest of your life. Your savings may get down to zero and eventually become negative. Leaving you in debt. Who knows? Isn’t it better to have a budget? It won’t take more than 5 minutes daily.
You can spare a few minutes, can’t you?
Now, in this article, I told you about what Budget really is? And how does it help you in maintaining your personal finance. Be it for your own only or with your family. I busted some myths about Budgeting and including many real life benefits to encourage you. Now if you do not stat budgeting even now, then you will be missing out on a lot. Open your browser or application store to install best applications or tools for your budget.
You will get hassle-free, user friendly tools to build up your finance game.