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The Benefits of Having a Budget

What do you think when you hear the word “budget”? Do you associate the word with negative feelings and connotations? That may be your reality if you’ve never experienced the benefits of budgeting. Without a budget set in place, it can be easy to lose control of your spending habits. 50% of the country is struggling financially, and 50% has no budget. Coincidence? Not likely.

A budget shows how you are spending your money now and helps you save to spend it in the future. So, in reality, a budget is just a spending plan. Wow, doesn’t that sound and feel so much better!

If you are looking for ways to manage your finances, here are a few simple tips.

1. Have a budget

If you don’t have a budget, you are not in control of your life; your money is. Without a budget, what do you do when you want to spend any money of significance? You turn to your money and essentially ask it for permission and say, ‘can I spend you.’ The second you do that, you lose control. By having a budget, you reverse that relationship. With a budget, you tell your money what it will do for you. A budget puts you in control!

2. Understand wants versus needs

Something you need is required for survival - food, clothes, shelter, transportation. Something you want is a ‘step up’ over needs. I need runners; I want Nike. I need a place to live; I want a 5,000 sq. ft mansion.

There is a dividing line between wants and needs, called ‘the things I can afford.’ Most of us are lucky, and the things we need and the things we can afford go hand in hand. If we are fortunate, the things we want and can afford also go hand in hand. We get into trouble when the things we want fall onto the wrong side of the things we can afford. What do many of us do then? We go, ‘well, I want it, but I can’t afford it, so I will put it on credit.’ I have some news for you, if you can’t afford it now, you can’t afford it 30 days later when the bill arrives! Not understanding our wants versus needs is how many of us get into trouble.

3. Track your expenses

It is very important to track your expenses as it shows you how you are really spending your money. If you don’t, all you are left with is the wish list, and wishing doesn’t pay the bills! And yes, you must track everything! ‘Oh, come on,’ you think, ‘Do I really have to track everything? I mean, what is a cup of coffee here, a muffin there?’ If you lose track of just $5 a day, you will lose $1,825 a year! I don’t know about you, but I can’t afford to lose almost $2,000 a year just because I couldn’t be bothered to track my expenses! So, have a real spending plan because, at the end of the day, a wish list just won’t cut it!

Having a budget (spending plan) is a key aspect of life. Check out this free excel-based budget spending plan! The template asks some questions upfront; these are important to answer as they will help the system provide you with some personalized recommendations. Just fill in the blanks, and away you go! If you have some challenges getting everything to balance, many of the expense sections have hyperlinks to take you to advice-based articles focused on that particular expense item! It is a great tool that even comes with some fancy charts and graphs – enjoy!

Tim St Vincent CEPF, C.I.M. (Hons.)

Financial Educator, Credit Counselling Society

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