Benjamin Franklin once said that
“If you fail to plan, you will plan to fail.”
What are your thoughts on the above quote?
. . .
I am a big proponent on planning and I believe that planning is essential in one’s personal, professional, and/or business lives. There’s no better place to plan than one’s finances. Personal finance is a big topic and the beginning of a New Year is a good time to talk about it, as well as Budget and Budgeting.
What is Personal Finance?
Personal finance is the management of your money and knowing how to make financial decisions that impact you (and your family). It starts with knowing how to budget, balance a checkbook, obtain funds for major purchases, knowing the difference between good and bad debts, saving for retirement, planning for taxes, purchasing insurance and making investments.
I am not a financial advisor. But I was a Sr. Financial/Budget Analyst for a few years during my professional life including having being a Budget Manager for a couple of social organizations. I also enjoy budgeting and analysis.
What is a Budget?
A Budget is one part of personal finance. In fact, I would say that it is the first step in personal finance. Budgeting is necessary to plan your cash inflows and outflows. However, a lot of people don’t budget, or like my younger daughter used to say in mid school, “it’s in my head.” The problem is that the head can only retain so much on any daily, weekly, or monthly basis; let alone annually. I also didn’t use a budget for years, but now I will gladly say out loud, “that’s not in my budget!”
On a personal basis, a budget is a plan of your income/all monies received by you less your total expenses, including monies set aside for savings, investments, and loan repayment if any..
Budget is for a specific period of time that can be a calendar or fiscal year. Personal budgets are usually done for the 12-month calendar year, but it could also be set for any rolling 12-months.
A Budget is a plan. It is not etched in stone. You can move money around from one bucket to the other especially for unforeseen expenses. But make sure that the bucket being used will not have any expenses for the year.
Benefits of Budgeting
- Avoid financial stress
- Know your financial state at any particular time
- Control and track your spending/expenses
- Help avoid unnecessary spending
- Helps prepare for financial emergencies.
The primary disadvantage of Budgeting is that it takes time to set up and to do the monthly forecasts. But once set you don’t have to redo it from scratch every month or year. Budget also helps you forecast your spending.
Most people are a paycheck away from (fill-in-the-blanks). This is partly due to living paycheck-to-paycheck and lack of budget and/or (financial) planning.
Start the New Year right with a Budget; a plan for your money; you will be glad you did. Reach out if you need help creating your Budget for the year.
Do you have a budget or feel that it is unnecessary to have/create one? Answer in the comments. Thank you!