It’s no secret that we all need a budget. Budgeting isn’t a fun activity, but it gives plenty of freedom if done well. Budgeting allows you to keep track of your cash flow. No matter the type of cash you receive – either from your work salary, inheritance, or savings – it’s crucial to label and monitor every cent that enters your bank account. Here’s why you need a budget.
5 Reasons You Need To Have a Budget
Having multiple sources of income is necessary to reach financial freedom, but you have to track every expense correctly, too. The good news is, you actually need a financial advisor to start budgeting your money.
1. Manage Your Income Wisely
Budgeting allows you to see which sources your income come from. As soon as you identify these sources, you may start to diversify your income portfolio: the greater the portfolio, the better. Do not rely on a single source of income, but get plenty.
2. Monitor Your Expenses
There’s no point in earning a lot if you are spending a lot. If you budget your money, it’s easier to determine whether you live beyond your expenses, or if you can actually claim financial freedom. It’s critical to follow your expenses precisely in order to avoid debts.
3. Plan the Future With Ease
You are the one who decides what the future looks like. Budgeting helps you plan your future. Need to borrow money to buy a flat? Want to finance a new project? Wish to get a retirement pension as soon as possible? If you budget early enough, you can clearly plan for the future and avoid critical issues that may hamper your retirement.
4. Have an Emergency Fund for Accidents
Not only does budgeting help you plan for the future, but it’s also a good idea to build an emergency fund in case of accidents or emergencies. Therefore, you should think of budgeting your money to see how much cash you can get if something bad happens such as an accident abroad, death in your family, or even bankruptcy. You probably won’t even use the emergency fund, so in the best case scenario, this fund will just fuel your savings.
5. Get Clarity on Your Real Net Worth
You should also consider improving your real net worth as a strategy. You should work toward increasing your real net worth on a daily basis, to ensure that saving and investing becomes a reality in the future.
Bonus: 4 Tools for Budgeting
Here are 4 simple tools to help you start budgeting:
- A simple notebook: the old and simple way to write down and keep track of everything.
- An Excel spreadsheet: the modern way to store your budget information on a computer.
- Mint: A cool budget application for novice and savvy people.
- PearBudget: another cool application that lets you plan your expenses.
Now that you understand the importance of budgeting, you might also want to read 4 free online budgeting courses to take advantage of.
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