Living within your means is the most responsible choice you can make when it comes to personal finance. Still, many people struggle when it comes to mastering the art of spending less than they make. Why? Because they spend without structure.
Budget restrictions scare a lot of people, but they are a necessary part of life if you want to be financially stable now and look out for your future as well. Below you’ll find four reasons you should create a structured budget and stick with it, even when it’s hard.
Appreciate What You Have
In today’s world, it’s easy to buy into the idea that you need more in order to be happy and fulfilled. Advertisements, ads, and Instagram posts constantly tell you about new products you need and items that will make your life easier and more rewarding. In a world that tells you to dream big and live boldly, people often find themselves focused on what they want instead of what they need. This mentality leads to reckless spending without regard for the consequences.
Creating a budget means sacrificing. You’ll have to follow rules, such as not buying a new purse or pair of shoes if it’s not in the budget, but creating a budget will also teach you to appreciate what you have.
When you live within your means, you are forced to stop shopping for things you don’t have and given the opportunity to experience and enjoy all that you’ve accumulated in life thus far. A structured budget also teaches you to value every dollar and make the most of it instead of recklessly spending it on more stuff you don’t need. Learning to save, to be mindful, and to appreciate what you have in life are great lessons you simply can’t put a price tag on.
Save for the Future
Creating a budget helps you focus on the present, as stated above, but it helps you look out for your future self as well. If possible, when creating your new budget, follow the 50/30/20 plan. This budgeting style has gained massive popularity over the years, and there’s no surprise why. The technique helps you plan for a stable future, enjoy life, and stay out of debt.
How it works is that you use 50 percent of your income (after taxes) to pay for necessities such as transportation, groceries, and rent. 30 percent of your income is put in a savings that’s not to be touched. This savings fund is reserved for the future (more than five years from now). This money will eventually help you buy a home, purchase a car, or send your kids to college. The remaining 20 percent should also go into a savings fund, but it’s purpose is to serve you in the near future. You can use the money found here for emergencies or to take a family vacation.
If you find that it’s impossible for you to separate your money this way, you might want to take a look at your income and expenses ratio. If you’re paying too much for rent, you might consider downsizing when your lease is up. If you pay too much for car insurance, shop around for a cheaper rate. The 50/30/20 budget works, and you should strive to stick to it as rigidly as possible.
Get Your Debt Under Control
If you’ve been living without a budget, chances are you’ve been spending more than you earn. It’s a common financial mishap. Credit lines are so alluring, promising you luxuries now that you can pay off later. But when you make a habit of using credit cards without paying off the balance, you find yourself in debt. Creating a budget that prohibits unnecessary spending will prevent you from charging items to your card and allow you to focus on paying off your debt instead. It’s never easy to make a drastic financial change, but you’ll thank yourself for making the sacrifice when you’re finally debt free.
Create a Relaxing Retirement
As you get older, you’ll want to escape the 9-5 life and enjoy your time relaxing, traveling, or checking items from your bucket list. Budgeting now helps make that dream a reality. By cutting back and living within your means, paying off debt, and putting money aside in savings, you ensure that your future is bright and stress-free.
No one loves the idea of budgeting. Sacrificing now for the future is responsible, but it’s not fun. Still, it’s one of the smartest financial moves you can make. Take a good look at your income, your budget, and your goals for the future and create a plan that works for you. Be diligent, stick to it, and you’ll find that the rewards far outweigh the cost.