Why you Need a Budget
How to set one up - Fast
Are you among the 51% of Canadians who don’t have a budget? Many people hate the idea of going over their expenses or stick their head in the sand when it comes to finances. Others simply feel that they don’t need a budget.
If you fall into this last category, ask yourself these questions:
- Are you unable to save money?
- Do you have debt?
- Do feel like you don’t have control over your finances?
- Are you stressed about money?
If you answered yes to any of these, then you do need a budget. Here’s why:
Take control of your finances
Are you living paycheque to paycheque? Is your debt growing, rather than shrinking? Are you afraid to look at your bank balance?
There’s nothing worse than feeling like you have no control over your finances. Dreading bills arriving and wondering how you’re going to make it to your next paycheque can be extremely stressful. A solid budget not only gives you a detailed overview of your income and expenses, it also provides you with a structured way to achieve all of your financial goals.
Take control of your spending
Without a budget, it’s impossible to know exactly how much you should allow yourself to spend out of every paycheque. When you don’t have a limit on your outgoings, it can be far too easy to spend more than you earn.
This in turn can lead to you slipping further and further into debt, which reduces the financial options open to you.
Take control of your debt
If you don’t follow a budget, you could continue down the road of increasing your debts rather than paying them off. A budget will highlight ways that you can reduce your spending and free up more money to put into reducing debt.
We all need to get into the habit of regularly saving money. Having savings allows you to buy big-ticket items, without going into debt. Savings can also bring financial freedom.
Short- and long-term savings goals are far more attainable if you have a budget. A robust budget plan ensures that your savings growth doesn’t come at the cost of increased debt.
And if you think you have nothing to save for, remember that without savings, buying a home or having a comfortable retirement are a lot more difficult.
Be able to brush off whatever financial curve balls life throws at you
Once you’ve set up your budget, an emergency fund will be one of the priorities that you’ll want to save for. This will allow you to take financial emergencies in your stride — whether it’s a leaky roof, broken appliance or other high, unexpected costs.
How to set up a budget fast
It can be really easy to set up a budget. Cornerstone/Thrive Wealth Management’s cash flow calculator can help you work out your net annual income and easily break down your expenses into these categories:
- Living costs
- Health care
- Loan payments and investments
- Additional costs such as child care and vacations
It will then automatically work out how much net income you have left over to put into paying off debt faster or growing your savings.