written by: M Lambert•edited by: Rebecca Scudder•updated: 8/14/2009
Budgeting can take time and effort. Many people simply do not budget because they do not think that it is worth it. However there are five purposes of budgeting that will allow you to gain control of your finances and begin to build wealth.
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Five Purposes of Budgeting
Budgeting is a tool that can help you accomplish many things. It can help you to spend your money with a purpose. It enables you to take control of your finances. There are five purposes of budgeting.
Purposes of Budgeting 1: Control Your Spending
The first purpose of budgeting is that it helps you to control your spending. As you track where your money is going and stick to a plan you can stop going into debt each month. You also consciously choose where your money is going. This helps you to make better financial decisions and makes sure your spending matches your priorities.
Purposes of Budgeting 2: Get Out of Debt
Once you have a budget in place you can begin to get out of debt. It allows you to free up extra money each month and apply it to your debt. Once you are out of debt you will have more money each month to save or spend the way that you want to. Many people do not realize how much of their budget is actually taken up by payments. Imagine what it would be like to be payment free.
Purposes of Budgeting 3: Wealth Building
A budget allows you to save and begin to invest your money. If you stick to your budget each month you will be able to leave the money you put into savings there. As you invest your money will begin to work for you by compounding interest and increasing. There will come a point when your investments bring in more a month than you do. This is when you begin to build wealth quickly.
Purposes of Budgeting 4: Achieving Your Dreams
A budget opens the door to help you achieve your dreams. A budget will allow you to set aside money to help you go on your dream vacation, purchase a house or start your own business. As soon as you have control over your finances you can begin working towards these goals that seem very far away when you are living paycheck to paycheck. Budgeting can make these things possible.
Purposes of Budgeting 5: Reduce Your Stress
Many people mistakenly think that a budget causes them extra stress, but it can actually help to relieve your stress. When you stick to your budget you do not spend needless time worrying about how you will pay certain bills or if a check will clear the bank. It gives you time to focus on the things that are the most important to you.