50 Ways to Stay Well #33 – Budgeting

Does the word ‘budget’ make your eyes roll?  Life is hectic enough and it can sometimes seem like budgeting is too much extra work on top of everything else. However, budgeting is a crucial step in staying in good financial health.

According to a 2017 report from TransUnion, Canadians owe more than $21,000 on average, in addition to any mortgage debt. A budget can help get debt under control while offering a bit of peace of mind.

The Balance shared some ways that budgeting can improve your life:

Acts as a Roadmap

Creating the budget will reveal where every dollar is currently being spent. The visual representation of the actual expenditures reveals the direction followed. The budget is a living document that must be updated with the changes that occur in your life.

Reveals Waste

A detailed budget that is compared against the actual monthly expenditures will reveal the incorrect use of money. When money is spent on non-budgeted items, budget shortfalls are created and can be corrected. When you can identify a source of waste you can then take corrective action.

Aligns Priorities

Family discussions over the budget can reveal differences in priorities that may often cause conflict. Conversations to address the underlying priorities will correct the problems and reduce disagreements over money.

Since money is such a stressful part of marriage, identifying discrepancies before they become an issue can do a lot of good.

Builds New Habits

Efforts to stay within the budget will build new spending habits that can be maintained over time. Working within the budget will shift actual expenses from unnecessary categories into the most essential household categories.

Money will be available for the most important expenses and debt reduction becomes possible.

Reduces Stress

Following the budget throughout the year gives everyone an accurate picture of the financial health of the family. Guesses are no longer required to determine if large purchases and vacations are affordable. When annual expenses are budgeted each month, sufficient funds will exist to pay the bill when it becomes due.

Controls Spending

If expenditures exceed budgeted amounts, corrections can be made in the coming months to control the monthly flow of money. When outstanding debt is weighing on the monthly finances, the budget can show areas where spending can be reduced to find the money to repay the debt.

Creates Margin

Debt repayment and living according to the budget will move the family toward living within the monthly income. As less money is spent, excess income becomes available and is considered financial margin. These funds can then be applied to other financial goals.

Grows Savings

Budgeting activities make money available to save some of the monthly income for various reasons. Short- and long-term goals can be reached through savings efforts that seemed impossible just months before a budget was created. Savings becomes the highest priority and money can be saved ahead of paying the bills since every expense is closely monitored and compared to the budget.

 

Resources

Money Mentors

Stretch Your Dollars: Budgeting basics – ALIS – Government of Alberta

 

Articles

How Budgeting Can Improve Your Life (the balance)

4 Unexpected Benefits of Budgeting (Dave Ramsey)

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