Are you grappling with financial debt, student loans, or just seeking financial freedom? You should start a budget.
The thought alone of building a budget might make you mentally tired. Don’t despair. There are fun ways to organize your income and expenses that will leave you feeling liberated. And we’re going to tell you all about them.
Budgeting doesn't have to result in a frugal lifestyle, if that's not your interest. Instead it will help you figure out how to make the most of your money by answering these three questions:
1.) How much do I earn?
2.) Where does my money go?
3.) Can I afford that?
A budget sets you on a path to financial success that offers long-term and short-term benefits. Whether you're paying a monthly rental insurance fee or saving up to be a first-time home buyer a budget is an important part of creating a financial map that will help you reach your destination.
Three Life-Changing Reasons to Budget
Freedom: Avoiding confinement in your personal and professional life is one of the most important reasons for budgeting. "When you budget, you are in a power position where you can make decisions that bring you closer to your life's dream," says Manisha Thakor, co-author of personal finance book On My Own Two Feet.
Understanding how you save and spend money now makes it easier to change course later in life. It also gives you the power to build reserve funds or work towards a life goal – like graduate school or a trip to Europe. A budget also provides the financial freedom to leave bad situations if you’re stuck in a dead end job or in a toxic relationship.
Debt-Free Living: A budget can help you escape a financial sink-hole. By prioritizing your current debts over other expenses – like going out to dinner – you can work your way towards debt-free living.
Whittling away at debt comes with many benefits. First off, you can stop making those monthly interest payment on your loans. Once your loans are gone, your credit score will likely improve. Your debt to credit ratio, or the amount you owe on accounts, is one of the five elements used to determine your credit worthiness. An improved credit score can translate to better savings when you need to borrow money again.
Respect for Your Energy: Most of us make our money by working. Each day we plug away at our jobs and in return we receive a paycheck. That means every time we make a purchase we're spending what it took our life's energy to make.
The process of "budgeting is respecting your life's energy," says Thakor. A budget helps you to make the most of the value of 50 weeks – sans 2 weeks for vacation – at the office.
Really, the pros of budgeting are endless. But to realize any of them, you have to create a budget that works for you. Check out our guide on building a budget once you're ready to get going.
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| Type | Today | Week Ago |
|---|---|---|
| 15 Year Fixed | 4.62%  |
4.67% |
| 30 Year Fixed | 5.15% | 5.15% |
| 1 Year ARM | 3.48% |
3.51% |
| 5/1 Year ARM | 3.62% |
3.68% |
| Type | Today | Week Ago |
|---|---|---|
| Line of Credit | 4.89%  |
4.88% |
| 10 Year Loan | 7.47% | 7.47% |
| 15 Year Loan | 7.61% |
7.60% |
| Type | Today | Week Ago |
|---|---|---|
| Interest Checking | 0.28% | 0.28% |
| Money Market/Savings | 0.38% | 0.38% |
| 12 Month CD | 1.13%  |
1.15% |
| 60 Month IRA CD | 2.40% |
2.41% |
| Type | Today | Week Ago |
|---|---|---|
| Cash Back Cards | 12.66% |
12.68% |
| No Annual Fee Cards | 12.08% |
11.97% |
| Reward Cards | 12.75% |
12.61% |
| Small Business Cards | 11.01% |
10.94% |
| Student Cards | 13.77% |
13.49% |
| Platinum Cards | 12.26% |
12.11% |
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I think the foundation of your budget has to be a long term goal. It might be putting a down payment on a house, early retirement, or saving up to take a month long vacation in Europe. Most people won't stick to a budget if they don't have a plan for all of the money they manage to save.
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I live in reverse. I save 30% of my income and force myself to live off the remainder
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One of the best reasons for budgeting is that without a budget, most people have no real idea how they spend their money. A budget allows you to align your priorities with your money decisions.
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I think that Ashley hit it on the head when she said that budgeting is for the long haul. It is this pratice of handling money that allows us to become capable to handle our priorities as they arise.
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Budgeting provides the necessary framework to help you reach your goals. Tracking your expenses gives you a sense of peace in knowing you that you are moving in the right direction. Stop making excuses (http://www.filife.com/stories/theres-something-about-budgeting) and try it today.
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L. Marie Joseph made a good point. While 30% savings may seem out of reach to some, the key thought is to Pay Yourself First.
A budget allows you to see where your money goes. Once you see where you spend, it is actually easy to shift things around, based on your priorities. The key element is knowing what is coming in and what is going out. Lesson 1 in finance: Cash is King. You need to know your cash flow to know if you can afford that next vacation, a career change, or other life event.
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