What a Budget Can Do for You
Part of the Test For Dummies Cheat Sheet
A budget is a plan for spending the income you have, building savings and using credit wisely. In short, a budget allows you to control the direction of your financial future. Here’s a list of things a budget can help you do:
Reach your life’s goals. First figure out what your priorities and goals in life are, then work out a realistic saving and spending plan that helps you achieve those goals.
Calculate how much your regular expenses are. Allocating money for every expense puts you in control of your money, deciding how your money’s used and helping you pay your bills on time. You have the power to make better decisions on how you spend your income.
Know just how much your regular income is. The amount you actually earn after tax may be less than you think. So, unless you change jobs or take a second job, you need to live within your means. By bringing spending in line with income, you ensure you don’t accumulate unmanageable debt and risk your good credit standing.
Prepare for unexpected events. An expected cost, such as a large dental bill, can blow your budget. To lessen the pain, it’s wise to budget for emergencies.
Get and stay out of debt. Because budgeting brings expenses in line with income, your debt level falls. Making regular payments can get you right out of debt.
Build your credit. Pay off the balances on your credit cards, for example, and both your available credit and financial standing go up.
Reduce stress. Gaining control over your finances relieves the constant worry over money, which can cause sleepless nights, reduced productivity at work and, at worst, family breakdown.
Stay healthy. By making provision in your budget for health insurance cover, you can take advantage of health benefits for yourself and your family.
Look forward to retirement. By calculating how much you’ll need when you retire and at what age you’re going to retire, and then putting money into super, retirement need not be something to dread.