Financial experts and money advisors have been telling people to budget their money for as long as we can remember. They don’t repeatedly shout this advice for no reason. When it comes to financial security, following a budget is the only way to truly secure your finances. Whether you have a perfect credit score or are in the process of credit repair, following a budget is equally important. Let’s take a look at why creating a budget will serve you in both good and bad times.
A Budget Helps you Focus on the Big Picture
A budget keeps you on track for reaching your long-term goals. Spending your money aimlessly will never get you to where you want to be. If financial security is the goal, you must have a plan, and that plan will involve a budget. How can you save up to buy a car, home, vacation, or retire without a budget? You can’t. A budget forces you to map out your goals, save your money, keep track of progress, and make your dreams a reality.
Helps Ensure You Don’t Spend Money You Don’t Have
Most people are spending money they don’t have. The majority of it goes on credit cards. In 2019 the average household credit card debt reached $7,104. Before easy credit, people had a better sense if they were living within their means. When you stick to a budget, you’ll never find yourself with substantial debt. You have clarity on how much you earn and how much you can afford to spend each month. It relieves stress knowing where you’re at every month.
Helps You Be Ready for Emergencies
Life is filled with unexpected surprises. Getting laid off, becoming sick or injured, going through a divorce, or a death in the family all can be a financial burden. The timing of an emergency is never good. This is exactly why you need an emergency fund as a part of your budget. This fund should cover at least 3 to 6 months of living expenses. This can be enough to help you recover in many cases. Even if you can only afford $10 to $50 each week, your emergency fund will slowly grow.
Leads to a Better Retirement
A budget can help you have a better retirement. If you set aside a portion of your earnings each month to contribute to your IRA, 401(k) or other retirement funds, you can build that nest egg that will allow you to retire in comfort. Although you’ll need to sacrifice some now, it will pay off down the road.
Need Help With Your Budgeting Strategy?
If you’re dealing with credit repair, you might feel like all of your resources are taken up, and you can’t make a budget now. That’s not true. You can always and should always have a budget. We can show you how a budget will help you stay on track during your credit repair and build the good habits that lead to financial freedom down the road.