Why budget is required

You are prepared for an emergency: As we saw, the only way to have a surplus is to spend less than you earn. This can save you during emergencies like a job loss, a medical emergency like an unexpected illness. Emergencies come without any prior warning and it is harder if you do not have the monetary cushion.

So your budget should have a surplus that goes into creating an emergency fund of six months of your expenses. If you have used up any of it, you should make it a top priority to rebuild your emergency fund.

It helps you lead a happier retired life: Retirement may seem far away but a day will come when you will stop earning but your expenses will continue. The only way to prepare for that is so build a retirement corpus. The only way to build one is to invest money on a regular basis. Remember, retirement is one of the goals that you are saving for. You might want to buy a house or plan for the higher education of your kids.

But solving this puzzle is really simple. The key is creating a budget. What is this budget you ask? Well, it is essentially your spending plan that helps you figure out what you really want to do with your money and how to achieve them all with the money you have. Sounds simple?

If you have a concrete budget plan in hand, it puts you in charge of your money. You know exactly how much money goes into which bucket. You can prioritize by knowing what to add and where to stop. It gives you the opportunity to empower your financial future. Spending is never a problem, it becomes a crisis only when it is not in sync with your personal financial plan. Eventually, it limits your spending capacity, as the major portion of your earnings goes into paying credit card bills.

This is exactly how you can lose track of your money. Once you have set yourself a personal budget, you will automatically stop when you no longer have money left in that bucket. Being the master of your own money, you allocate funds an amount agreed upon in each bucket. When you are making a personal budget for yourself, you take into account the fact that you have to put a certain amount of money in the save bucket.

Following a budget will also help you catch more shut-eye. How many nights have you tossed and turned worrying about how you were going to pay the bills? People who lose sleep over financial issues are allowing their money to control them. Take back the control. When you budget your money wisely, you'll never lose sleep over financial issues again. Of course, this is just the tip of the iceberg. There are countless other advantages of following a budget. So what are you waiting for?

Time to start budgeting! Wealth Management. Debt Management. Retirement Savings Accounts. Personal Finance. Actively scan device characteristics for identification. Use precise geolocation data.

Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Once you create your first budget, begin to use it and get a good feel for how it can keep your finances on track , you may want to map out your spending plan or budget for 6 months to a year down the road.

By doing this you can easily forecast which months your finances may be tight and which ones you'll have extra money. You can then look for ways to even out the highs and lows in your finances so that things can be more manageable and pleasant. Extending your budget out into the future also allows you to forecast how much money you will be able to save for important things like your vacation , a new vehicle, your first home or home renovations, an emergency savings account or your retirement.

Using a realistic budget to forecast your spending for the year can really help you with your long term financial planning.

You can then make realistic assumptions about your annual income and expense and plan for long term financial goals like starting your own business, buying an investment or recreation property or retiring.