Creating a budget is one of the single best financial actions you can take for your household. Once you have your goals and priorities straight, the next step is to learn how to manage your money.
Setting a budget is something that has to be done even before you learn how to invest your money. Why? Because all the income in the world won’t make you any richer as long as you’re spending more than you take in.
Why Do You Need to Know How to Budget?
Why do you need to know how to budget your money? Because a budget keeps you on track! Just like a diet keeps your eating habits in check, a budget does the same for your spending. It gives you something to measure against so that you know if you are doing good or heading for trouble.
Every successful business in the world operates with a budget. This is why companies pay big money for financial managers and other financial professionals. As the owner or CEO of the company, you’ll want to know that you’re going to end the year in the green rather than the red.
What do you think would happen if that same financial manager presented a budget where the company was going to spend more than it makes; with no plan for any return on investment? Think he’d stay employed for very long? Think the company would stay in business for very long?
You can laugh at that example, but that’s exactly what people do everyday. All the time, they spend outside their income means to buy expensive clothes, cars, gadgets, and other useless stuff. And none of it will ever bring them any extra money or more income.
Why should your home finances be any different from the way a profitable company is ran?
Why Most of Us Are Terrible At Creating a Budget:
“Why don’t I know how to budget my money better?” you ask – Most budgets fail in the same way that a diet or exercise routine fails – because they’re unrealistic. What good is saying you’re only going to spend X dollars this month when you know good and well that it’s not likely to happen? We create plans that we would like to achieve but have very slim chances of ever succeeding in.
Do you have an experience with previous attempts at budgeting where you (or your spouse) just said “Well, I don’t know how, but I’m over my budget again this month!” Perhaps it’s not the spending but rather a lack of planning that got you into this predicament.
A great budget starts with one key piece of data – your prior expenses.
How to Budget My Money – Table of Contents:
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