The word “budget” often evokes negative feelings. Instead of looking at a budget as a series of restrictions on your spending, it is more helpful to instead see it as your family’s financial roadmap. There are many benefits, both long and short term, to preparing a family budget:
Goal setting and achievement: it’s one thing to have a goal of purchasing a new home in three years time, and quite another to map out the amount you will save each month to get you to that goal. A budget allows you to see exactly what you need to do, and how you are going to do it.
Control: a budget allows you to maintain control of your spending, and direct excess funds to areas that you have deemed to be greater priorities.
Reality Check: going through the budgeting process will quickly tell you whether or not you are living within your means. With today’s easy-credit, low-interest environment it’s amazing how long you can live beyond your means and not notice. Preparing a budget allows you to identify damaging spending trends before you have built-up more debt than you can handle.
Partnership: sitting down with your spouse or partner and identifying common goals and an action plan to achieve them is a great way to ensure you are both on the same page financially, and can head off any differences in opinion before they grow into serious arguments.
Preparation: budgeting for a contingency fund helps you prepare for emergencies or unanticipated expenses that might otherwise be quite damaging financially.
Budgeting should be the first step of any financial plan. The time you spend preparing a budget will pay dividends in the future as you bring a more disciplined approach to your finances. Rather than limiting the money you can spend, I’m sure you will find that sticking to a budget actually creates extra funds for you to spend on the things that are important to your family.
Yours truly,
Michael Arbetov , CFP, FMA
Financial Advisor
[email protected]
www.ArbetovInsurance.com