Budgeting has many benefits that far outweigh dread people feel when they hear the word.
What I find most entertaining is people who I have worked with on a budget and how their attitude toward budgeting changes as they get used to how it works and how much better life is when you budget.
At its core, budgeting is a detailed spending plan. Instead of money coming in from your job and then going out to whatever money hole comes up during the month.
Instead of this whirlwind method, budgeting allows us to anticipate the amount we have coming in and then spend all of that money on paper in designated categories, before we have to spend that money in the real world.
When something comes up and changes our plans, we are ready for it and can shift spending toward the emergency and away from categories that are flexible. This kind of organized also leads you to making better purchases.
Know What You Buy
When you start telling your money where it is going to go it forces you to be more focused on the items you are buying.
Once you know there is only $550 for groceries this month, you start realizing that the store brand cereal is 50% cheaper and tastes 90% as good (or better). I am willing to drive one mile farther to go to the discount store instead of buying what I need at the higher priced more convenient store.
Knowing what you are buying and the pricing is a major benefit that most people do not expect when they first start on their budget plan.
Helps with Priorities
Before I started budgeting everything that came up felt like a priority.
Want to go out for desert? It’s a priority.
Friends heading to the movies? It’s a priority.
Bob bought a grill that is better than my clunker? It’s a priority.
When Amy and I started budgeting we realized how few things we were doing were true priorities. Most of our spending was flexible and we could decide to shift that spending toward things that were really important. Of course that required us communicating about our priorities.
It was a great revelation in my marriage when I realized that my wife did not always prioritize spending the same way I do. Who could have seen that coming, right?
Video games, trips to the movies to watch super heroes, and computers are not at the top of my wife’s spending list. She’s more interested in traveling, gardening, and all sorts of other weird things that never even cross my mind (just kidding honey!).
When we started budgeting, we realized that each of us had priorities that the other did not share. It allowed us to compromise and set aside money for what was important to each of us, while forcing us to look at our own wants to see if they were a real priority or a perceived priority.
These conversations brought us much closer together and, over time, we were able to know each other better and anticipate what each other wants.
Reach Your Goals Faster
Reaching our goals was the one benefit to budgeting that made us get started. We were young and recently married when we started Dave Ramsey’s course.
We had all these big dreams about life and what we wanted to accomplish, but all those dreams took money. Some were simple, like getting out of debt. Others took planning, like yearly vacations.
What all of these goals had in common was that they took planning and our budget made that plan come together.
When I got married Amy and I had accrued about $16,000 of debt. In some ways we were fortunate because we didn’t have any student loans.
On the other hand, that means we managed to rack up that much debt in consumer spending. Getting out from a series of monthly payments was one of our short term goals.
By budgeting and finding all the ways we were wasting money, we were able to redirect our bad spending toward paying off debt. We paid all that debt off in 13 months, while my wife was in school and only worked part time.
Create an Emergency Fund
Before we took on our debt we put together a beginner emergency fund. Since there were only two of us and our puppy, and we didn’t own our home, we saved $1,000.
The benefits of budgeting played a big roll in our saving this money. Any money we had left from wedding gifts immediately went into our emergency fund. And we cut about $200 of food spending from our budget (Hello Little Caesars $5 pizzas!).
The focus our budget put into out spending made all the difference in getting this emergency fund in place and, once we finished our debt payoff, allowed us to put our full emergency fund of six month of expenses in place.
Helps with Investing
I like investing, but not being a naturally organized person it always took a back seat to my poor spending. With Amy taking over the budget, we made investing for retirement a priority.
Having an item in our budget just for retirement investing made all the difference.
Gets Rid of Stress
I left this one for last because it is my favorite of all the benefits of budgeting. When you know exactly where all your money is going and that you have enough money, there is much less stress in your life.
Before I started budgeting it felt like my money kept disappearing and that there was never enough.The paycheck to paycheck lifestyle was constantly stressing me out.
Now that my household has a budget, I always know exactly where I stand. Even being able to transition from a paycheck to paycheck budget to a full month at a time budget reduced even more of my stress.
Even if we were to have a month where we didn’t have enough money, we know exactly how much money we need to go out and get to make our budget balance. Putting together a budget and knowing your number gets rid of all the stress of not knowing.
Final Thoughts on the Benefits of Budgeting
As you can tell I am a major fan of budgeting. I believe in it so much we teach budgeting to other couples at our church.
With all of these benefits to budgeting, it should be easy to see why it can be such a life changing decision. If you do not currently have a budget, I strongly encourage you to get one.
If you don’t know where to start, check out the book and study guide from I Was Broke. Now I’m Not. It is the most affordable way to get your entire financial plan in action.