With the major holidays almost over and a new year approaching, now is perfect to put time into creating a budget. This past year has been especially hard for me, including my financial situation. I wasn't prepared to pay for a funeral and related expenses on top of extra property taxes, everyday living expenses, and, *gasp*, traffic court costs.
Needless to say, I've been scrambling trying to make ends meet. Let me tell ya, that's even less fun than it sounds.
Is Creating a Budget Necessary?
I used to scoff at the thought of creating a budget. Being a single woman, I resented the idea of not being able to spend my hard-earned money however I wanted. And then I wound up here.
So, while a budget may not be necessary, it is a good idea.
Why is a Budget Important?
There are countless reasons behind the importance of a budget. I'll keep it simple and only share three. The first is the fact that a budget keeps you honest... with yourself.
When you spend freely, it's too easy to start living beyond your means. You open charge accounts and credit lines and before you know it you're so far in debt you can't see a way out.
(click here for help getting out of debt.)
Having a clearly defined budget allows you to enjoy the pleasures of shopping but keeps you from going overboard.
Reason number two why budget is important comes down to preparedness. You can never be too prepared, so prepare for the unexpected. Wishing isn't enough to keep the unexpected or unthinkable from happening. If Murphy's Law (the adage, not the show) has taught us anything it's that if something CAN go wrong, it WILL.
A budget allows you to set aside money for expected and unexpected events like a major purchase, a sudden death, or a natural disaster. Choose an amount you can easily afford and set it aside each paycheck. Set up a separate account, if possible, to make it less tempting to use this money.
The third importance of a budget is the motivation it gives you. While you're planning how much to spend and how much to save you're also looking at your expenses in a new light. Maybe you didn't realize how much you spend on eating out or entertainment. Seeing how your money is spent can inspire you to cut back on unnecessary expenses.
In contrast, budgeting can help motivate you to increase your earnings. Maybe you want to go on vacation or buy a new car. Knowing how much you currently have to spend on something can give you the push you need to ask for a raise or increase your hourly rates.
How to Create a Budget
The last thing you want to do when creating a budget is drop a ton of money on learning how to budget. Thankfully, there are many free budget resources available that allow you to quickly and easily create a personal budget.
I'm working on creating a budget in Excel and will keep you updated on my progress there, as well as share some example spreadsheet budget planners with you.