Reasons for Preparing a Budget

A budget can help you avoid unpleasant financial surprises.

If you've ever had an expensive overdraft charge from your bank, you'll appreciate the value of keeping track of your money. Budgeting can do more than keep you out of financial trouble, however. It can help you to decide where you want to go financially and help you get there.


To Get the Big Picture

At the end of the month, many people are left wondering where their money went. A budget can take away the mystery and help you to keep track of your paycheck. If you write down exactly how much your expenses are and how much you plan to spend on discretionary purchases and entertainment, you'll know how much money you should have in your bank account at the end of the month. You'll also get a clear picture of how much money you are spending on transportation relative to housing, school expenses and other useful information.


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To Set Goals

You've been wanting to take a trip to Europe for years, but it never seems to come together for you. Creating a budget takes your goals out of the hands of chance and puts them squarely within your reach. When you make a budget, you can set aside money for important goals, such as a down payment on a house, a trip or a large purchase. You may have to cut back on other expenses, but having a budget will help you to decide where to trim the fat so that you can meet your financial goals.


To Be Accountable

It is surprisingly easy to spend hundreds of dollars over the course of a month without having a thing to show for it. The people at TurboTax recommend keeping a budget to increase your financial accountability. For example, you may be spending more than a hundred dollars a month stopping at the corner store for a cola and a snack on your way home from work. Keeping a budget will prevent you from making unplanned purchases that can add up and keep you from meeting important financial obligations and goals.


To Save Money

When you develop a budget, you evaluate each purchase you make in terms of how it fits into the budget. This helps to make you more conscious of the money you are spending, and will force you to evaluate whether or not a purchase is one that you truly need. For example, if you have made a budget and have decided that you will allot $100 each month for entertainment, you may think twice before buying several pricey drinks at a bar if you plan to buy a pair of concert tickets later in the month.

A budget can also help you set aside money for your savings just as you would any other expense.



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