Why should I bother with a budget?
It is very common for people to know how much money they earn each week, but many have no idea how much they spend.
Businesses use budgets to manage their cash flow. There is no reason why you can’t do the same.
Because not all expenses are occurring every pay period it is easy to forget to put money aside for an expense that only crops up every few months (e.g. a rates, or car registration). If you put a little bit aside every week, then you won’t have to starve to pay the bills when they arrive.
Budgeting can also help you to check that you are not spending more than you earn. It is very common these days for people to be funding their lifestyles from an overdraft or credit card. If you are acquiring debt, you need to check that you can afford to pay it back.
A loan repayment is going to take a chunk of your pay for the next few years until you pay it off. If you are already struggling, this loan repayment is going to make the situation worse. It is much better If you can save the money for the purchase rather than borrowing.
Check out my earlier post about creating a budget.
Once you know how much is left over after your expenses, then you can start a savings plan. My next post will show you how compound interest can grow your regular savings over time.