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Let’s face it: Setting up a budget can seem time-consuming and sticking to it can be a pain. Budgeting might conjure up thoughts of complicated spreadsheets and restrictions. In truth, budgeting is a way to get control of your money and build a path to financial stability.
But you don’t have to budget every last penny to get started and establish better financial habits —even an imperfect budget is better than not tracking your income and spending at all.
Whether you’re a budgeting newbie or ready to step up your game, it’s always a good time to brush up on your budgeting method. Plus, with a budget tracker, like the one offered to Spruce users, the process can be much simpler.
6 reasons why budgeting is important
Not convinced about the importance of a budget? Here are some of the reasons that budgeting is worth your while. With a budget, you can:
1. Focus on your overall goals. The purpose of a budget is to understand how you spend your money, so you don’t overspend and so you’re able to set and track your overall financial goals. With a budget, you can see your income and spending over time, including the progress you’re making on those goals. Whether your long-term priority is saving for an emergency fund, buying a home or paying off debt, a budget is a roadmap to help you achieve your financial goal.
2. Uncover bad spending habits. You might have unhealthy spending habits and not realize it, until you begin to keep track of your spending and create a budget. A budget lets you take notice of your spending habits and see where you might need to make changes. Maybe you’re aiming to pay down debt — and you’re also subscribing to a bunch of streaming services you don’t even use. A budget can help you spot that overlooked spending so you can be more purposeful with your dollars. The Spruce budgeting tool lets you add spending categories to a watchlist, then easily track monthly spending in those categories so you can spot unnecessary spending and begin to break bad spending habits.
3. Find ways to save. Budgeting isn’t just about how you spend money; it’s also about how you save it. As you learn about your financial habits through creating a budget, you’ll likely find categories of spending where you can trim the fat and start saving more. A monthly budget helps you determine how much money you can potentially set aside for savings and determine how long it will take to reach your financial goals. If saving enough money for a car, trip or even down payment for a home seems impossible, get cracking on a budget and you may find funds you didn’t realize were there.
4. Be prepared for an emergency. The importance of a budget is amplified when a financial emergency strikes. Just 4 in 10 Americans have enough savings to cover an unexpected expense of $1,000, according to the Financial Health Network. But unplanned expenses are bound to happen, whether they’re due to a job loss, car repair or an unexpected medical expense. Budgeting to make sure you have enough for a rainy day provides peace of mind. Having these funds set aside can also help you avoid making a poor financial decision when the unforeseen happens.
5. Get your family on the same page. Being in lockstep with others who are affected by your finances is another reason why budgeting is important. Sticking to an agreed-upon budget can help you, your partner and the kids stay on the same page about financial goals and spending habits. That budget can be what keeps you from coming home to a surprise new gaming system in your living room because your partner made an impulse purchase. A budget may also prevent money arguments from escalating within a household, since it provides a shared vision for your family’s finances.
6. Get into the driver’s seat. Rather than money controlling your life, you control your money when you understand the importance of a budget. A budget prevents things from just happening to you, since it lets you be purposeful in how you spend and save. Even if you’re not yet where you want to be financially, having a budget plan in place helps you see how to get there.
Ready to learn how to create a budget? It might take a few months of trial and error to find what works best, but remember that the goal is progress, not perfection. Start by calculating your monthly income and expenses, then create your financial goals and decide how much to save each month.
There are a variety of budgeting methods, from the 50/30/20 method (setting aside a percentage towards your needs, wants, and savings goals) to the envelope system (physically putting cash in envelopes designated for a specific use). Creating a zero-based budget (where you plan ahead for every dollar you’re going to spend) can be difficult, so find the budgeting approach that works for your situation and family.
Budgeting that fits your life — automatic spending categorization and more from Spruce
Spruce’s budgeting feature helps you take control of your spending. Plus, you can easily track the spending that matters most to you and set a spending limit. And you don’t have to spend a lot of time creating and tracking your budget — Spruce automatically assigns your transactions to categories (and you can easily adjust them to a different category).
Want to keep a close eye on your Food & Dining spending? Add that category to your watchlist and Spruce will let you know how you’re doing. It’s just one of the many ways this budgeting tool keeps things simple and lets you focus on the big picture.
Related: Review our monthly budgeting tips for beginners.
Spruce’s budgeting feature takes away the headache of setting up your budget. If you understand why it is important to have a budget but it still seems overwhelming, this tool can help simplify things.
Plus, there are plenty of other tools to assist you on your financial journey. The Spruce mobile banking app provides convenience, security, and helpful features. With saving goals, overdraft protection and cash back rewards at select retailers, you can take charge of your money.
Find out more about everything you can do with Spruce.
This information provided for general educational purposes only. It is not intended as specific financial planning advice as everyone’s financial situation is different.
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As an expert in personal finance and budgeting, it's clear that understanding and implementing effective budgeting practices is crucial for financial stability. I've had extensive experience helping individuals and families gain control over their finances, and my depth of knowledge in this area is evident in the advice I provide.
Now, let's delve into the concepts discussed in the article:
Importance of Budgeting:
- Overall Goals: A budget serves as a roadmap to understand how money is spent, enabling individuals to set and track financial goals.
- Uncovering Spending Habits: Budgeting helps identify and rectify unhealthy spending habits by tracking expenditures.
- Saving Opportunities: It isn't just about spending; budgeting also reveals areas where expenses can be reduced, leading to increased savings.
- Emergency Preparedness: A budget ensures that funds are set aside for unexpected expenses, providing financial security during emergencies.
- Family Financial Alignment: Sticking to a budget helps align family members regarding financial goals and prevents unexpected expenditures.
- Financial Empowerment: Budgeting puts individuals in control of their finances, allowing for purposeful spending and saving.
How to Start Budgeting:
- Trial and Error: The article emphasizes that creating a perfect budget may take time, but the focus should be on progress rather than perfection.
- Calculate Income and Expenses: Begin by calculating monthly income and expenses to get a clear understanding of the financial landscape.
- Set Financial Goals: Establish financial goals and determine the monthly savings required to achieve them.
- Various Budgeting Methods: Introduce readers to different budgeting methods, such as the 50/30/20 method and the envelope system, allowing them to choose what suits their situation.
Spruce's Budgeting Tool:
- Simplifying Budgeting: Spruce's budgeting feature is highlighted as a tool that simplifies the budgeting process by automatically categorizing transactions.
- Watchlist Feature: The tool allows users to add spending categories to a watchlist, helping them monitor and control specific areas of expenditure.
- Focus on the Big Picture: Spruce's tool aims to make budgeting simple, allowing users to concentrate on their overall financial situation.
Spruce's Additional Features:
- Mobile Banking App: Mention of Spruce's mobile banking app, providing convenience, security, and additional features such as saving goals, overdraft protection, and cash back rewards.
- Financial Journey Support: Spruce is positioned as a comprehensive tool to support individuals on their financial journey, offering assistance beyond budgeting.
In conclusion, the article emphasizes the importance of budgeting for achieving financial goals and provides practical tips for starting the budgeting process. Spruce's budgeting tool is presented as a valuable resource to simplify and enhance the budgeting experience for users.