Four Uses of a Budget

Budgeting can help you reach your financial goals.

Everyone wants more money. And yet, with a floundering economy, widespread job loss and high costs of living, people are finding themselves trying to stretch each dollar and pinch each penny. A budget, whether it be for personal or business use, is necessary now more than ever. You may be surprised at what you learn when you start watching your spending, but that knowledge can also help you reach your financial and personal goals.

Track Expenses

It is easy to forget where you spent that extra money last month or realize just how much you are spending on certain expenses. Budgeting allows you to see these facts in black and white. Being able to make financial decisions based on facts rather than memory will help you stay on track and set realistic goals. Making a spreadsheet and keeping receipts is a good way to manage finances, especially in a company or a household with multiple members who may not communicate about each expenditure.

Set Limits

Budgeting allows you to set limits on your spending. A budget helps you determine how much money you should have going out each month based on how much income you have coming in each month. Seeing where your money goes each month can help you distinguish between fixed expenses, such as housing and food, and non-fixed expenses, such as entertainment. Cut down or eliminate non-fixed expenses, to avoid excess spending. Setting limits on your spending will help you stay accountable for your financial decisions.

Reach Goals

Without a budget, you have no way of really knowing where each penny is going each month. Whether you have your sights set on a new house or a car, planning ahead for such expenses can help you reach your goals sooner. Set a time line in order to buy the item and determine a realistic amount to set aside each month in order to afford it.

Build Wealth

Plenty of people become millionaires without a budget, but most will not stay millionaires without one. In order to build personal or business wealth, use a budget to save money. Many financial experts agree that the best way to build wealth and be financially responsible is to eliminate debt, invest as much as you can afford to and live within your means. Budgeting can help you make your money work for you and put you on the road to financial freedom.

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