Benefits Of Setting A Budget

Have you ever been in the situation where you’ve gotten to the end of the month and have no idea where all your money has gone? You’re not alone. According to Moneymags research, a staggering 86% of Australians don’t know their monthly expenses. When I read this statistic I was blown away. 

Here’s another shocking statistic for you. 3.2 Million Australians are overspending money they don’t have according to Property updates research. That’s 16% of the population who are getting further and further into debt. 

Here’s another question for you. Do you know what your biggest expense is every month excluding your mortgage? A lot of people also struggle to answer this question too as they don’t have a handle on their finances.   

Now I want to move away from the doom and gloom and focus on a solution which is setting a budget and tracking expenses. There’s a great quote that helps articulate the value of this step from the Management guru Peter Druker: “You can’t manage what you can’t measure.”

The Benefits Of Setting A Budget

Planning For The Unexpected

There’s nothing worse than getting to the end of the month, having no savings and then something unexpected happens like your car breaks down. How are you going to pay to get it fixed? By having an emergency fund for things you cannot predict, you give yourself a bit of breathing room for those unexpected events that life throws at you. 

The example of the car breaking down is going to sound trivial compared to the next two. What are you going to do if you have a serious illness which prevents you from working for 6 months or you get made redundant just before that bonus you were counting on. Do you have 6 months of savings stashed away to cover those expenses if you can’t work? Even if you don’t get made redundant, you can’t work forever so having some savings apart from your Super is going to give you peace of mind. 

Investing In The Future

The additional benefit of having a budget is that you’ll get this feeling of being in control and a sense of direction towards the future. Personally I think there’s something very rewarding about watching your finances grow over time.

Increasing Awareness Of Your Spending

Now this post isn’t necessarily prescribing that you have a strict budget and follow it every single month otherwise they’ll be hell to pay. Even if you don’t stick to it every month, it will start creating a conscious awareness of where your money is going so that you can take positive action the following month. 

Keeping Things Simple: Following A Template

There are hundreds of templates, apps and systems out there with varying degrees of complexity on how you should create a budget and stick to it. I wanted to keep it easy for you by providing a simple template that you can fill in and track spending each month. The sheet also includes some instructions on how to get started.

I’d recommend reviewing your budget sheet monthly to keep on track of your expenses and how far you’re progressing towards your goals. You may not get it right the first time but practice makes perfect. Try doing this for a few months and you’ll be amazed at what difference it can make. 

To avoid relying on willpower alone, I’d also recommend automating the process as much as possible. An example of this could be setting up a regular payment to a specific account which you’re using to store your savings. 

Taking Things Further

For those of you interested in increasing your wealth through investing, I offer a number of courses which take absolute beginners and turn them into investor pros. Book in your 15 minute free consultation to discuss your situation further. 

Summary

This post has hopefully opened your eyes to the benefit of setting a budget and provided you with an easy to use sheet where you can track your progress. I’d love to hear how you get on and feel free to reach out if you have any questions. 

Disclaimer

None of  the content is intended to provide you with personal financial advice. Information provided is factual and educational in nature for you to apply at your own discretion. 

You may wish to seek independent financial advice from a professional advisor for advice pertaining to your specific situation.