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Budgeting is not the torture mechanism
we've been trained to think it is, but rather a powerful method of gaining control,
planning, communicating, and fulfilling your dreams. At the very least, a budget should
allow you to find extra spending money in your paycheck every month! You can actually get
money by budgeting (where most people think of it as a way to deprive yourself).
Taking it from the top, I hope to help us all re-learn personal budgeting by dismissing
our outdated ideas and understanding better what it is and what it isn't.
So Why Budget?
A budget is the most fundamental and most effective financial management tool available to
anyone.
Yes, anyone - whether you are earning thousands of dollars a year, or hundreds of
thousands of dollars. It is extremely important to know how much money you have to spend,
and where you are spending it. Yes, some of your "spending" might be for
investments, but there is an important distinction between creating a personal budget and
deciding where to invest your extra income. A budget is the first and most important step
towards maximizing the power of your money.
What is in it for you?
Just about everything. A carpenter would never start work on a new house without a
blueprint. An aerospace firm would never begin construction on a new rocket booster
without a detailed set of design specifications. Yet many of us find ourselves in the
circumstance of getting out on our own and making, spending, and investing money without a
plan to guide us. Budgeting is about planning. And planning is crucial to produce a
desired result.
What is a budget?
A budget is a money plan. With it, you can organize and control your financial resources,
set and realize goals, and decide in advance how your money will work for you. A budget
can be as simple as it is powerful. The basic idea behind budgeting is to save money up
front for both known and unknown expenses.
Seven Benefits of Budgeting
1. Know what is going on.
Personal budgeting allows you to know exactly how much money you have-even down to the
penny, if you so desire. Furthermore, a budget is a self-education tool that shows you how
your funds are allocated, how they are working for you, what your plans are for them, and
how far along you are toward reaching your goals. "Knowledge is power," as the
oft-quoted saying of George Eliot goes, and knowing about your money is the first step
toward controlling it. That leads us to our next benefit:
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