“Balancing a checkbook,” is a very obsolete term nowadays. Most people can now automate their bill payments via digital apps. However, that is not the same as knowing what you owe, how much you make, and if you’re earning money efficiently relative to the entirety of your personal finances. The advantages of budgets always outweigh not having one.
You should always take the time to balance your finances and to work from a weekly, monthly, and annual budget. Unfortunately, some people may just not know how to do such.
Financial Literacy
Did you know that 43 percent of people are financially illiterate? Financial literacy is the educational ability to make informed and self-beneficial decisions concerning one’s financial future.
To put this statistic in perspective, Botswana has a similar financial literacy rate for its citizenry. The American economy is over 1,100 percent larger than Botswana.
That is not a good look for the citizens of a country that is usually referred to as the, “greatest,” in the world.
According to data compiled by the Bureau of Labor Statistics, the average American makes about $919 weekly, or about $48,000.
So, it’s important to make the most of every cent earned in an economy that numerous economists fear is heading for a recession in 2021.
Here are some advantages of budgets that you should keep in mind. And admittedly, some of the limitations of having one.
Advantages of Budgets
When creating a budget, you’ll understand where your money is going. You’ll have a better understanding of how much you are paying for essential and non-essential expenses.
The best way to free up more money in your personal finances is to accept the difference between, “need,” vs, “want.” For example, you need to pay your rent or mortgage.
Conversely, you may want to buy a 200-channel cable TV subscription package, designer clothes, etc., but don’t necessarily need to.
It’s harder to spend money arbitrarily when you make a written record of your bills, expenses, and income.
Additionally, you can better plan ahead for upcoming bills and prioritize accordingly.
Limitations of Budgets
A detailed budget can initiate shocking reveals you may be unprepared to learn. Some people are more than happy to spend money blissfully unaware of financial consequences.
You might learn that you spend more money than you earn.
Or, that you are precariously living from paycheck to paycheck and constantly live a delicate financial existence. For example, 40 percent of people don’t have $400 to cover an emergency that presented itself.
The biggest drawback of budgets is that they require time sacrifices, discipline, and concentration. You must sit at a table and look at receipts, expenditure records and figure out your full financial picture.
To many people, creating a budget is akin to a cruelly unbearable chore.
100% Control
When you have a budget, it can help you attain financial goals or ambitions. Also, a budget gives you 100 percent of your finances, instead of allowing the whims of your finances to control you.
Nothing worthwhile is ever easy. Still, having a budget will always be more advantageous than limiting for you.
Read More
HOW TO PLAN AND BUDGET FOR PROM COSTS
HOW YOU CAN GET THE MOST OUT OF YOUR MARKETING BUDGET
HOW MUCH SHOULD YOU BUDGET FOR AN ENGAGEMENT RING?
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.