Why you need a budget.

A lot of people try to avoid the idea of budgeting their money. They will tell you that it just takes too much work, or that having a budget is too restrictive. I understand these sentiments; setting up a good budget can be a lot of work, and I didn’t spend my entire adolescence yearning for freedom just to be put back on an allowance (ok, I never actually received an allowance, but you get the idea). When you look at the facts, however, I think you’ll see that budgeting, rather than being restrictive, really creates financial freedom.

Having a plan is the key to success

A budget is really just a plan. People make plans all the time. In fact, there is an entire industry dedicated to designing, publishing, and selling all kinds of planners. What’s more, these planners can be found in many different formats: printed, electronic, digital. My BlackBerry, for instance, is designed primarily for the purpose of making it easier to stick to a plan, only it’s called a schedule. I can set appointments, get alerts for birthdays, set alarms for appointments, and even be reminded of the fact that I’ve set an alarm to remind me of an event! While I can make it through life without the aid of my BlackBerry, I am likely to forget something along the way.

As a teacher, I develop lesson plans. While I could get away with winging it from time to time, my teaching just is not effective unless I plan out what I am going to teach, how I am going to teach it, what materials I will need, and what considerations I will need to make for some of my students who require extra support and attention. If I were to just wing it every time, my students might learn something, but they wouldn’t learn anywhere near as much as they do when I have a plan.

A budget is a plan

A budget is simply a plan for your money. Sure, it’s true that, as with other areas of your planning life, it is possible to get by without this financial plan, but you’re bound to let something drop eventually. And even if you don’t let something drop, you just won’t be in as good of financial shape as you could be without a budget. Budgeting is really the key to reaching your financial goals.

Having a budget frees your finances

You see, when I am following the plan of my budget, I know exactly how much money I can spend because I have already determined how much money is available for a purchase. Instead of going to the checkout stand, handing the cashier my AMEX, and then figuring out how to make the monthly payments, I can confidently make the purchase without suffering lingering consequences.

Other advantages to having a budget include: never having to wonder if you’ll be able to pay your bills for the month, being able to see the picture of your overall finances going in a positive direction, and knowing where all of your hard-earned money goes instead of wondering where it went.

I like the way that Bob at ChristianPF compares a budget to making cookies. He says that a budget is simply measured spending. You have to have a recipe that works and understand that budgets, like cookies, are intended to be enjoyed, not feared.

What is your plan?

So, if you haven’t already put together a budget, get started! There’s nothing like exchanging the fear and uncertainty of haphazard spending for the confidence and freedom of a good financial plan. Resources for creating a budget are all over the place, but you may wish to start here, here, or here.

Picture by _ES.