- Before you explore why keeping a budget is important you should understand what it is. A budget is a way to compare and manage your income and expenses. A balanced budget has income equal to or exceeding expenses. When your income is higher than your expenses, you have a budget surplus; if you find that expenses exceed income, you have a budget deficit. You can create a budget with a basic spreadsheet program or a program designed specifically for managing your personal finances.
- Keeping a budget is important because it allows you to set and manage your personal financial goals. For example, if you find that you have a budget surplus every month, you can then start to set savings goals. If you find that you have a deficit, you can set a goal to make more money by finding a new, better-paying job. Maintaining a budget also allows you to monitor these goals regularly to see if you're on track to achieve them.
- Many people who live paycheck to paycheck (running out of money before the next paycheck arrives) have this problem because they do not keep a budget. When you have a budget you know where your paycheck will go before you even receive it. You can adjust your budget as needed so that you have money left over to do what you need to do each week or month. Having a budget is empowering and gives you more control over your money.
- A more intrinsic benefit of keeping a budget is that it gives you peace of mind when it comes to your money. Without a budget you don't have a plan and you don't know where you'll be at the end of each month. When you maintain a budget listing your income and expenses as well as your money goals, you know where you stand financially at any given point in time.
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