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Unlocking Financial Freedom: 7 Benefits of Creating a Budget

With all that’s going on in the financial world right now—a housing affordability crisis, a potential recession, and layoffs in tech and other sectors—it’s easy to feel out of control when it comes to your money. 

While you can’t control what happens in the stock market or on Capitol Hill, you can control what happens in your checking account. One of the best ways to do that is to use a spending and savings plan (also known as a budget) to manage your income and expenses. 

Creating and sticking to a budget might seem like just another chore, but the benefits are many and far-reaching. Here are seven of the greatest advantages of creating a customized plan for spending and saving your money:

  1. Financial awareness
  2. Goal setting
  3. Managing expenses
  4. Reducing debt
  5. Avoiding new debt
  6. Optimizing savings and investing
  7. Relieving stress

7 Surprising Benefits of a Spending and Savings Plan

While it takes some time and intention, tracking your spending and using a spending and savings plan has many psychological and fiscal benefits. Here are just a few ways that using a budget or spending plan will increase your net worth and peace of mind.

1. Financial awareness

You can’t adjust your spending or saving habits until you know where your money is going. Even if you have a high income, if you also have high expenses, you are treading water financially. But this is hard to see unless you put the pen to the paper to paint a picture of what’s really going on. Tracking your expenses will make you more aware of your financial health. 

Once you know how much you spend each month and on what, you can make educated decisions about how to change your spending habits (if need be). 

2. Managing expenses

A budget has a way of highlighting unnecessary expenses. For instance, when you review your spending each month, those unused subscriptions stick out like a sore thumb. 

Knowing that you’ll review your transactions later can also deter impulse purchases. By using a spending and savings plan, you’ll see which expenditures you regret at the end of the month, giving you a good idea of the areas that could benefit from spending cuts.

3. Goal setting

A spending and savings plan is an essential tool for monitoring your progress toward financial goals. By allocating a certain amount to an emergency fund, a 529 plan, or a retirement account each month, you can confidently predict when you’ll reach your goal. 

The same goes for short-term goals, such as a family vacation or a home renovation project. A budget also helps you determine how to redirect funds if you want to reach your goals sooner.

4. Reducing debt

If paying off debt is one of your financial goals, a spending and savings plan is a tool you want in your arsenal. Tracking your spending and debt payoff keeps you accountable to your goals and consistent at sticking to them. Watching your balance go down each month is a great motivator for keeping your spending within your predetermined limits.

A spending and savings plan will also help you discover areas you can temporarily cut your spending to allot more funds to pay down debt.

5. Avoiding new debt

This advantage of a budget is wildly underrated. Even if you’re on a good financial course at the moment, that can change very quickly if you’re not tracking your expenditures. 

A spending and savings plan for large, periodic expenses (such as vacations, busted water heaters, and new vehicles) will ensure that you have enough cash to cover them. By allotting a small amount each month for these eventual purchases, you won’t be tempted to finance them or put them on a credit card.

6. Optimizing savings and investing

To make the greatest impact in your savings and investing accounts, you need to consistently contribute to each. Planning these deposits into your monthly budget is a great way to make sure they happen. 

Tracking your savings can be very motivating; it gives you a little dopamine rush to see your net worth go up each month. 

7. Relieving stress

This may be the greatest reason of all to use a budget to track your spending and savings. Knowing exactly where your money goes, how much you’re saving and investing each month, and how much your debt decreases will help you sleep better at night. 

What’s more, it will help you plan for a comfortable retirement and a legacy that you can leave to your heirs and the institutions you care about.

Use Your Spending Plan to Unlock Financial Freedom

Some of the advantages of tracking your savings and spending are financial; you’ll easily detect any mindless or extraneous expenditures so you can redirect that money to more important priorities. It can also help you keep a pulse on your net worth, investments, and debt levels so you can make sure each is headed in the right direction.

But many of the benefits of a budget aren’t measured in dollars and cents. How do you put a price on the relief of being debt free, knowing that you’ll be comfortable in retirement, or that you’ll have enough to leave a legacy to your favorite charity? While the budget is a financial tool, its true value is how it makes you feel about your money.

By using and sticking to a budget, you enhance your financial situation now and ensure that it will continue to improve in the future. 

For more information about how budgeting can help you reach your goals, sign up for our newsletter so you never miss out on our tips, tricks, and strategies!

Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.


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