Budgeting is a way of planning how to spend your money, and do all financial activities in a sustainable way. To have a successful budget plan, you need to know how much money will come into your life every month in the form of a paycheck from work or from some other source. This can be money from a pension, benefits, rental income, and so on.
You should also know how much money you need to pay for bills like rent or mortgage, insurance policies (both life and property), credit card payments, and taxes. You can add up all these expenses to arrive at your monthly budget when you make a budget plan. Then subtract your total budgeted expenses from your income.
The difference is the amount of money you have to save every month if you follow a budget plan. Here are the ways in which budgeting as a method helps you save money in order to afford the lifestyle you want.
Gets you the best deal
If you pay careful attention to your finances for budgeting purposes, then it is likely that you know where and when to buy things for the lowest possible price. For example, if you are keen to learn about this type of knowledge, then perhaps at various times in the past year, you shopped for electronics online because it's cheaper than buying them from a store.
Or, you could have figured out that there are sites that help you compare the best prices for different series, and you take advantage of this; if you visit insurdinary.ca, you'll be able to see comparisons for insurance, loans, mortgages, etc.
Another way people save money is by shopping around for the best deals using coupons, vouchers, clearance sales, and other ways to get discounts.
Promotes discipline
Budgeting is a discipline in itself. The mere act of creating and sticking to a budget forces you to stay on your financial toes and exercise control over your spending habits.
For this reason, it is important to mention that people who fail to stick with their financial budgets often neglect them out of an unwillingness or lack of desire to stay disciplined. When you start a budget plan, don't get discouraged when your savings fall short by a few dollars every month.
It's natural and doesn't mean you aren't cut out for budgeting. You must fight any feelings of discouragement and keep at the budget plan until the point where over time you learn how to follow through and achieve your goals, including saving money.
To illustrate the importance of discipline, consider the following example: Let's say you make $3,000 a month and spend $2,799 or within 1 per cent of your income every month. This will leave you with about $201 left to save in order to meet your monthly budget plan, which is about 10 per cent of your take-home pay.
However, when you look into what has caused this deviation, it turns out that you spend an additional $200 on eating out every month.
If you were truly trying to stick to a budget plan, then at this point in time it would be best for you to cut down your food intake outside so that you can go back on track and start saving money again according to your 10 per cent monthly budget.
If instead of cutting down on eating out you increased your income by $200 for example, then you will still be paying $2,899 as monthly expenses and save nothing. As a result of not sticking with your financial budget plan, over time your savings will rise to only about 10 per cent of your income, which is definitely not what you want if you are trying to save enough money for a lifestyle that's better than what you have now.
Promotes self-awareness
Budgeting can also be viewed as a tool that enhances your level of self-awareness. By living within your means, you are constantly aware of your financial situation and are always on the lookout for ways to improve it.
For example, when you create a budget plan for groceries, you realize that what you thought would be enough money to make it through the month falls far short of your expectations. To solve this problem, you might prioritize cutting down your expenses on food and instead try to earn more money on the side.
Budgeting is a wonderful habit that helps countless people around the world save money on a daily basis. Even though it can be difficult to develop at first, once you master the basic concepts of budgeting and incorporate them into your life, you will soon begin to see how valuable it truly is.
Remember, there are no rules when it comes to budgeting. Just keep on trying until over time you discover ways to create the kind of lifestyle you have always wanted with less stress and more financial freedom than before.
