Budgeting is by far one of the most under utilised tools for helping individuals to pursue a more stress free and enjoyable lifestyle. This article explores how budgeting can improve your life helping you regain control of your finances and offers some practical suggestions to get started.
What is a budget?
Before we examine how budgeting can improve your life we first need to briefly understand the concept. Budgeting is simply a means of planning how you will spend your finances by writing it down. The idea often strikes fear into many people for the simple reason that many of us don't have a good overview of what we spend, where we spend it and why. Helping to unravel and understand these simple questions can help place an individual firmly back in control of their finances and is very liberating.
I have prepared some basic information about how budgeting can improve your life based upon my experiences of working with individuals at all levels of society, who have experienced debt problems.
1. Feel in control of your finances.
Impulsive buying is perhaps one of the biggest enemies of sound financial control and can leave people feeling stressed, anxious and depressed when they later realise that they are unable to keep up repayments. The most stressed person can appear visibly relieved after just spending an hour preparing a detailed monthly budget. Whilst the budget itself may not resolve the difficulties they face it can highlight areas where spending habits need to change and enables an individual to think about their financial circumstances and understand that they can regain control.
Practical step: Spend an hour now to produce your own monthly budget, there is an excellent template available for free at via Microsoft, see the resources links at the end of this article
2. Improved Relationships
When individuals are feeling stressed and anxious about their financial circumstances one of the first things to suffer are relationships with a spouse, partner or family and friends. Creating a clear monthly budget plan can improve these significantly because the individual concerned feels more in control of their circumstances and has a clear plan of action to remedy the situation. This often results in them feeling more relaxed as a result and more able to spend time maintaining important relationships.
Practical Step: Consider getting the whole family involved in planning the monthly budget. This can be a great way of everyone feeling involved in the household financial matters and also take ownership for spending decisions. It is also a superb way of teaching children the value of money and help them to develop their own good budgeting habits in the future.
3. Improved Savings and Investments
If an individual is able to identify spending habits that are unhelpful or extravagant as a result of producing a monthly budget then this can often result in that money being put to better use. For example if an individual regularly spends $4 a day buying a coffee from Starbucks on their way to work, this equates to $60 a month. A budget plan may identify this as a poor use of money (or it may not!) and cause a change in the person's spending habits.
Practical Step: Perhaps in future you could wait until you get to work before having a free coffee. This $60 could then be placed into savings and/or investments to secure your financial future. $60 over 12 months is $720 a year.
4. Improved Health
The effect stress and anxiety can have on the body is hugely negative. Constant worries and concerns over a prolonged period combined with poor diet are proven to be significant risk factors to heart attacks, which is the singular largest cause of death in the developed world. Preparing a monthly budget places an individual back in control of their finances, which in turn can lead to lower stress levels and an improved lifestyle.
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