What is budget? Why Budget ?

What is Budget?

What_is_Budget

Definition as per Investopedia: A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a group of people, a business, a government, or just about anything else that makes and spends money. 

Why Budget ?

You must have a budget if you plan to save money for retirement or other large ticket purchases. If you don’t want to be controlled by your money, you must take control of it and make your money work for you by using a budget.

Most people have no idea if they are living within their financial means or not, until they find themselves so far in debt that they can’t get out. If you have goals or dreams for your future, most will require a certain amount of money- without a budget, you are likely to never achieve those goals and dreams. Also, and probably among one of the most important reasons to budget is that it allows you to prepare for emergencies and the unexpected. 

Without a budget, these unexpected expenses can be detrimental to your finances, and even change your life. For most people, “budget” is a “bad word”. If you begin to understand that budgets are the road to financial success, you are likely to have a much easier time reaching your goals with a budget. How Do You Spend Your Money? Without a budget, it’s not possible to keep track of all of your spending. 

Many people think they know exactly where their money goes on a regular basis, but without a budget- I guarantee you will be surprised if you do a monthly tracking challenge. On a piece of paper, or in a small notebook that you can carry around with you, write down every rupees you spend for a period of one month.Write down every single coffee you buy at the local coffee shop, the candy bar and newspaper you picked up at the market, and absolutely everything you spend your money on for a period of a month. Add it up. I guarantee you had no idea you were spending that much money on the little “incidentals”. 

Three Budgeting Techniques Lead to Financial Success. 

1) Controlling Daily Spending: While it’s true that most people spend money on things that are not necessary, it’s important to control this type of spending. 

2) Creating Financial Safety: Everyone should prepare for the unexpected. There needs to be access to money for things like an illness or accident that puts anyone out of work for awhile, or a natural disaster. 

3) Preparing for Financial Goals: Everyone has some financial goals. Whether you want to buy a house or retire at a young age- these are all activities that require financial preparation and budgeting. 

Having a budget is a discipline approach to reaching your financial goals, having money for entertainment and for your quality of life, and being able to afford the items and expenses you have to pay.