Budgeting

In these hard times, it is essential to manage one's finances and invest on things wisely. Not only can you benefit from it in the long run but you can also become more mature and knowledgeable when it comes to handling your finances. That is why, it is important to come up with effective and doable budget plans to ensure the future for you, your family and your business.

What is budgeting?

The word budgeting come from the short word "budget" which means allocating funds that is available and can be readily used in case of any emergency. It is a strategic way of planning for spending and saving your money. It is done by making a calculation and estimating your monthly earnings and expenses (it also involves all your bills, debts and any other purchases which involve shelling out some money). Budgeting is known to be an essential task in every individual's financial situation and way of living since budgeting is the determining factor of where you are in terms of your fiscal status. Also, budgeting entails a lot of self-discipline and determination, for it can be a daunting task to observe since we have endless needs and wants.

What is the role of budgeting to debt management?

Budgeting and debt management always go hand in hand. Budgeting during a debt management process is one of the initial steps when it come to controlling your income and expenses. With the help of budgeting, not only can you have a successful debt elimination and a debt management process but you can also benefit from fiscal constancy and freedom.

It is wise to do budgeting since you cannot bring back the past - all the previous purchases you've made and the things you used your money for. But instead, what you can do is to be bright and hopeful for the future and do budgeting to build resources you can use later on.

Why is budgeting important to debt management?

Doing a debt management method to help you eradicate your debts is helpful, but when you put budgeting arm in arm with debt management, it makes it more effective. Remember, you can never get any assurance when you don't make a budget.

Also, budgeting makes life easier to handle. Debts are much convenient to deal with and you have a greater grip on your finances. It does not only aid you in the financial aspect but it can also help you nurture yourself and your being. Admit it or not, budgeting does take away a lot of the frustrations you have. It relieves you from all the stress you feel with your debts.

Through budgeting, you will be able to figure out how much you are in debt of and how much money you can actually afford to spend and how much you can save up.

The Advantages and Disadvantages of Budgeting

Advantages

·It gives you a strong sense of where your money goes (which things you spend on, which bills you have paid already and which purchases you can make cut backs).

·It helps you attain all your financial objectives.

·With budgeting, you are free to do whatever you want to do. You can go on a vacation, make a lot of trips to different countries, buy a new house, car, property, etc.

·People who do budgeting can be ensured of a good life even if they retire.

Disadvantages

·It can get quite confusing.

·It can be hard to stick to especially during times of crisis.

·Because of the different demands and the desire to make both ends meet, budgeting sometimes become impossible to do.

3 Steps to Successful Budgeting

1.) List down your income and purchases.

·Document and do a calculation of your income and estimated expenses.

2.) Reduce spending habits.

·Identify which areas you can cut back - like your regular visits to salons, 3x a week dinner at restaurants or monthly shopping sprees.

3.) Practice sticking to your budget.

·The key to effective budgeting is to start off small and eventually expand your budget as time goes by. By doing this, you will have more chances of not breaking your budget and you won't get pressured.