What comes to mind when you think about creating a budget? For many people, even the idea of putting one together is unappealing. However, there is another, more positive way of looking at your budget that may surprise you. Budgeting can be a way to gain more control of your finances and empower yourself to do more of what you want to do in life. So while budgeting takes foresight and discipline, and may require you to master impulse purchases, it’s worth putting you in the driver’s seat. Over time, a budget has the power to:
1. Let you decide. When you allocate dollars as part of a budget, you give yourself an opportunity to reflect on where your money is going and to make adjustments, if necessary. For example, if you’re surprised how much you’re spending dining out or shopping for new clothes, you can cut back in those areas. Ultimately, knowing your spending patterns gives you the power to invest your money in the things that mean the most to you and help you achieve your long-term goals.
2. Take the pain out of everyday decisions. The daily temptations to overspend become easier to navigate when you have a black and white frame and guide. Setting a budget equips you with the power to say “yes” or “no” to a purchase without feeling guilty. You will be able to see what is within your price range and get a clear view of how each purchase will affect your savings plan. The more specific your budget, the better.
3. Make it easy to see the value of every dollar. When you’re arrogant about your spending, you’re discounting the effort it takes to earn money. On the contrary, when you consider everything that goes into earning a paycheck and the expenses you are incurring for your home, food, clothing, entertainment, etc., you will have a clearer picture of your daily financial life. It’s also important to consider the potential long-term benefits of investing some of your hard-earned savings. This is likely to further strengthen your resolve.
4. Help you make bigger financial goals possible. Large purchases can seem out of reach when you’re not tracking your spending patterns. Creating a budget gives you a roadmap to follow, making it clear what trade-offs are possible if you want to hit your goal sooner.
No matter what your net worth is, a budget can be a useful tool to help you be a good manager of your finances. Your financial advisor can help you review your expenses and recommend investment strategies to keep you on track toward your financial goals.