4 Reasons Why Budgeting Is So Important

4 Reasons Why Budgeting Is So Important

"A is telling your money where to go instead of wondering where it went" - David Ramsey

Pre-quarantine, were you the type to buy coffee every day on your way to work? Or perhaps, since you started working from home, things on the job have been crazy and you’ve been ordering-in food a lot more than usual? I mean UBER EATS has been having 30% off burger joints lately. Or maybe, pre-quarantine, you were the club-goer-type? One night out a week with the boys? Drop a couple of stacks at the club?

Have you ever taken a minute to tally-up all of your monthly impulse purchases just to see where your money is actually going? You would be shocked at how quickly things add up! If you bought coffee five days a week for KES. 300/$3 a cup, in a year you would have spent about KES. 78,000/ $780 on coffee a year!  If you went to the club twice a month for a year and spent about KES. 15,000/$150 each time, that adds up to KES.390,000/ $3,900 on club expenditures for the year. Even if you have the money to spend, that is still a lot of money to be spending on coffee and nights-out, don’t you think?

Without a budget, your money has no real financial direction. Without a budget, all you know is some money is coming in and some money is going out. Even if you’re making a tonne of money, it still has to have some kind of direction. That’s why creating a personal budget gives your finances direction, purpose, and a chance to really grow and benefit you and your family.

While budgeting doesn’t always sound sexy, the benefits totally are! That’s why this week’s blog is going to list 4 great benefits of creating a personal budget.

1. Budgeting establishes financial control

Like I said, without a budget, you're kind of just coasting on a general flow money. Some is going out, some is coming in, however, you have no real idea about your financial status. Also, you’re living on the assumption that money will continue to flow.  By establishing a personal budget, you are able to reveal your financial wastefulness. 

Relax, I’m not pointing fingers. 

All I’m saying is that by seeing exactly how much you spend and on what, you’re able to clearly separate the necessary from the excess. This information is useful because it equips you with knowledge on where you need to curb your spending and reduce financial waste, thereby allowing you to spend on things that are important to you and giving you a better handle on your finances.

2. Budgeting keeps you organized

There is nothing worse than not knowing the status of your finances. It doesn’t matter how much you earn or how little, financial organization is crucial. Most people think that a personal budget is designed to only help organize people who are tight on money. I’m telling you now, this is a myth. A personal budget is a tool for people across all tax brackets. The numbers might look a little different for everybody but the goal is the same - to establish and maintain financial wellness. 

A personal budget forces you to itemize your spending habits, showing you where your money is currently going and what’s leftover - if any. This information forces you to have a transparent conversation with yourself and encourages you to build better spending habits to improve your economic stability. Additionally, if you have debt it helps you spot financial wastefulness and redirect your finances towards improving your debt management. 

A personal budget is more than just creating a spreadsheet to help you save more. It is an organizing tool that helps you actualize the potential of your finances and ultimately, improve your quality of life

3. Budgeting grows your savings

As we’ve mentioned budgeting helps you get a hold of your financial organization and as we all know, with financial organization comes an increase in saving capacity. 

Actively budgeting helps you use your money for necessary things. Sticking to a strict budget, means, no extra coffees, no unnecessary nights out, no impulse shopping sprees. While it may sound a little boring, stifling even, budgeting doesn’t mean you can’t enjoy your money, it simply means organizing your financial enjoyment within pre-designed parameters. This helps reduce financial waste, thereby giving you the wiggle room to redirect any surplus to your savings account. 

Save! Save! Save!

We’re always talking about financial freedom and one way to ensure this is through saving. It might sound like a yawn-fest, and perhaps a little overwhelming. However, budgeting is a great way to initiate a domino effect that will curb previous wasteful spending into your savings account.

Having savings increases your financial options and even opens you up to investing in something fruitful. 

Africa’s Pocket has a user-friendly budgeting tool to help you get started. Click here to learn more.

4. Budgeting helps you plan for emergencies

Ever lost a phone? Crashed a computer? Got into an unexpected minor health emergency?

Hands-down, the worst feeling of all-time is being unable to afford an emergency. All of the costs mentioned above are necessary costs, meaning they are things one cannot do without.

A phone - you need it to communicate. A laptop - you need it for school and/or work. A health emergency - I mean, everybody needs a functioning body. Do you see where I’m going with this?!

Being unable to afford an emergency can be a very precarious situation especially when it could have all been avoided by putting a little bit of money aside each month. A phone, a laptop, and a minor health emergency are all pretty affordable in the grand scheme of things. If you earn about KES. 100,000 / USD $1000 a month and put aside 10% of your salary each month, within a year you would have saved KES. 120,000/- / USD $1200. 

That amount can easily get you any phone, laptop, or cover most minor health emergencies. 

Emergencies can inflict irreparable financial ruin, especially when one is underprepared. Why risk all of this when you can simply protect yourself by implementing an easy-to-use budgeting system and keep you and your finances on your toes?

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