When you know your income and track your expenses, it helps you understand how to invest, save and pay off debt. But just tracking your expenses doesn’t change how much money you can spend every month; it only ever tells you where that money is going.
The path to personal financial wisdom is enlightened by making a budget.
The goal of any budget is up to you, but the reasons for budgeting are pretty plain to see. Tracking your income and expenses paints a clear picture of how much money is available to save or spend, and once you spot patterns, you can identify where to make adjustments.
Six Reasons Why
- Budgets Can Be Simple
It’s arithmetic, not algebra. One column for your income, another for your expenses, then keep a running tab on the difference between the two.
- Budgets Allow Flexibility
Live now but save for the future. A reasonable budget helps you find the money for day-to-day living, date night, an emergency fund, and a savings goal like vacation or retirement.
- Budgets Put You In Control
Get out of debt and stay out of debt. Knowing your expenses in advance reduces the risk of overspending and can help you pay off the debt you already have.
- Budgets Help Reach Goals
Are you dreaming of a new house? Without a working knowledge of your income and expenses, the dream stays stuck in sleep mode.
- Budgets Stop Overspending
Your cash flow is what allows you to pay for everything. Traditional budgeting starts with tracking expenses, eliminating debt, and building an emergency fund once the budget is balanced.
- Budgets Help You Save Money
Identify reducible expenses and cut them, recognize painful interest rates and change them. The aim of budgeting is to make sure you have the flexibility to save a little each month, which in an ideal world is around 10% of your income.
As a bonus reason, a budget can also go a long way to build consumer confidence and even ease the pressure of stress when managing financial decisions and preparing for challenges.
How to Budget Like a Pro
Like any subject, financial literacy is something we learn, not something we’re born with and the best way to learn is to ask questions. Online blogs and personal finance websites regularly publish budget tips and advice, and industry experts earn their living by having really good answers.
But busy schedules and social distancing rules are the living reality for most folks right now. For this contingency, Empeople has online digital education modules that help get members up to speed with lessons and tips in budget creation, financial literacy and preparing for retirement, just to name just a few.
These video tutorials are short, simple and filled with useful information to help beginners and experts alike in understanding the following financial topics:
- Consumer Skills
- Income and Employment
- Managing Credit and Debt
- Financing Higher Education
Empeople also has a professional staff of industry experts available for one-on-one consultations. However, for many members the secret to budgeting success can be found with the personal financial management tool Money Manager.
Available online for Empeople members only, Money Manager combines personal finance tracking – your earnings, your investments and your long-term financial goals – and day-to-day money management – what you budget, how much you spend, and where your money goes.
Money Manager offers personalization and tracking for all your accounts in a secure, one-stop environment, including personal accounts, loans, credit cards, investment accounts and more.
Some more Money Manager features include:
- Expense tracker
- Net worth calculator
- Account aggregation
- Categorization tagging
- Bill and income calendar
- Goal management and tracking
Budget Cost Benefit Analysis: Worth Every Penny
Budgeting should be something that everyone does, regardless of their financial situation. In the worst-case scenario, a budget helps you to be prepared for job loss with at least three months’ worth of living expenses in the bank. This vital financial cushion is easier to accumulate if you know the amounts you’re bringing in and spending every month.
But the best-case scenario for having a budget is only ever limited by the imagination. With a clear and accurate picture of income and expenses, a budget and a strong will to succeed, the pursuit of your financial dreams can resume in vivid color.