4 Reasons You Need a Financial Budget (if you’re starting over)

Big thank you to Dana Ronald at the Tax Crisis Institute for sharing this article with us!


Starting over money-wise can be difficult and intimidating, especially if you have been “punched in the gut” with your money situation. As many people realize, there may not be enough money remaining to pay bills at the end of the month (or other budgeting periods). However, avoiding this is not completely out of one’s control. You may have heard the saying, “failing to plan is planning to fail”. One must make a plan so he/she will know if they are deviating from his/her goal. Two financial habits worth practicing are making a budget and following the budget. Remember, though, for a budget to work it must be carefully planned and constantly followed. The following are four reasons to budget if you are starting over.

The first reason you need a financial budget is a budget will help you achieve your goals. Since a budget is a plan that helps prioritize your spending, you can focus on your most important goals. These goals might include climbing out of debt, starting a business, or saving for a home. Your budget will let you see your money inflows and outflows each month and how they may affect your goals. A budget helps protect any money you have previously saved. This prioritization of spending can reduce the stress involved with a budget and promote better health.

A second reason you need a financial budget is that budgeting helps improve your habits or perceived needs. This is also true if you have money saved. If you have developed and follow a budget, sometimes that new car may not seem as important to you. When you become sold on the helpfulness of your budget, impulse purchases at the grocery store or on Amazon may become a thing of the past. A budget (correctly internalized and followed) will make your goal clearer and the path to financial success less difficult. Ask yourself what your needs really are and analyze why you think that. The results can be eye-opening and helpful.

A third reason you need a financial budget is a budget will help you save money. Those who do not have a budget save less money on average versus people who have a budget. Automatic draws from your checking account to a savings account can be close to painless. The reasoning goes that if you never see the money, you will not miss it. A carefully followed budget may help stop you from accessing your checking account each month to “get by”. There are many things that one can find to spend their money, some necessary and some not. However, a well-planned budget and the complete internalization of this budget can turn needs into wants quickly.

A fourth reason to create a financial budget is it can help you stop worrying and allow you to be more flexible. One reason some people dislike a budget is the restrictions it puts on them. However, these folks should consider a budget allows you to decide how much you will spend and where you will spend it. If desired, one can budget a big percentage of their money towards leisure activities, benevolence, or savings. The purpose of budgeting is not to limit your life but to make available different opportunities. To most people, it is a relief to know when to stop spending because of low funds. Budget can have the flexibility to move funds between budgeted categories each budgeting period. In this way, budgeting allows you to handle unexpected expenses.

A budget stops overspending and helps you maintain or gain control of your finances. Many people do not maintain a budget and overspend each month (or other budgeting period). Treat your budget as a roadmap for your finances, and your relationships may improve through reduced family arguments. If each member of your family or circle is on the same page, goals will be achieved more easily. There will probably be rough times at the start of budget implementation while everyone learns how to follow the budget and things to avoid. Remember, changing one’s habits are slow, painful, and requires sacrifice. At this stage, it may also help to read about the psychology of change and ways to motivate oneself.

If you are experiencing budget/financial issues, give Tax Crisis Institute a look.

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