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9 Reasons You Need a Budget If You Want Financial Freedom

June 24, 2019 5 min read

Thinking about starting a budget? Take a look at these 9 benefits of budgeting your money so that you can succeed with your financial goals.

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Before you can live your dream life you need to know what you’re working with. And that starts with a budget.

It’s true, creating a budget isn’t the most exciting way to spend your evening. But your budget is your road map. And without it you’re going to find it so much harder to move towards your dream life.

Still not convinced? Here are 9 great reasons to show you why you do need a budget.

You can tailor your budget to your needs and lifestyle

As soon as you say “budget” people start thinking that it’s going to involve a lot of work. But it really doesn’t have to!

A budget is just a set of two lists – money coming in and money going out.

And while the basic idea is always the same, there are lots of different budgeting methods to help you get there.

If one of them isn’t working for you then switch it and try another.

Not sure where to start? Take a look at these 6 different budgeting methods and see which one works for you.

Gives you a plan for your money

A goal without a plan is just a wish.

It doesn’t matter what your financial goal is – whether it’s putting a deposit down on a house, saving enough for your dream holiday to Cuba, or having financial independence so that you can finally quit that soul sucking desk job…

If you’re serious about succeeding with your financial goals then you need to have a plan for your money. And that plan is called a budget.

Creating a budget will force you to break your goal down into actionable steps, and it’ll keep you accountable so that you can make that dream a reality.

Keeps you focused on your financial goals

Once you have your plan in place you’ll find yourself spending your money much more intentionally.

Sure, it sucks having to pass on that latest Fenty launch. But keeping your goal in mind and knowing why you’re passing it up makes it so much easier to make that sacrifice and walk away.

It can stop bad spending habits

It’s easy to lose sight of the bigger picture when you’re spending a little here and there.

Tracking your spending gives you a clear picture of where your money is going, and you’ll quickly start to recognise patterns and habits.

On first name terms with your Deliveroo driver? Buying breakfast on the way to work because you keep sleeping in? Signed up to a membership subscription that you’re not using?

Think about your spending in the context of your financial goals. Is your spending aligned with your priorities?

Those daily lattes, treats and shortcuts all add up and can easily sidetrack you from your goals.

But that doesn’t mean that you can never treat yourself.

Instead, incorporate it into your budget. Figure out how much you can afford to spend on treats and non-essentials. Withdraw that amount in cash or transfer it to a separate account.

Then you’ll have the freedom to spend it however you want, knowing that it’s not derailing you from your financial goals.

Puts you in control of your finances

Without a budget it doesn’t matter if your intentions are good.

Mindless spending will creep in.

Before you know it it’s the end of the month and you’re faced with an empty bank account wondering where it all went.

Now you’re forced to scrape the barrel to cover the essentials, or worse put them on your credit card. So when payday comes you have to start the month paying for those financial missteps.

It’s an endless cycle where your money is in control of you.

But when you budget, you’re in control of directing where you want your money to go. You’re not reacting to your money mistakes any more.

Instead, you get to be proactive in deciding exactly where you want more money to go. And when you do that, you’re in control of your money and your dreams.

It helps you prepare for emergencies

An emergency fund is your financial safety net.

Financial planners will usually recommend having 3 to 6 months worth of income saved up to cover any unexpected sudden costs.

That can be an intimidating amount of money to put away, especially if you’re living paycheck to paycheck.

But when you know your budget you can break that total up into manageable chunks, and just focus on saving up that amount each month.

Saving small, regular amounts can be much more effective in the long run.

It’s much more manageable than trying to put away a big chunk of money, and it gets you in the habit of regular saving, which will work in your favour over time.

Makes your money work for you

Budgets aren’t just for tracking your money. They’re a tool that you can use to build wealth.

Once you’re clear on your financial goals and have your plan in place you can start to make the most of your money.

While your emergency fund is best kept in an easy access account, long term savings could benefit from fixed term accounts that offer higher interest rates. That includes ISAs and bonds. Just be aware that although bank accounts are generally safe, other types of investments can carry some risk.

Frees up your “hidden money”

When you create a realistic budget you get a great overview of where your money is going. This can help you to focus in on areas where you might be squandering your cash.

Check if there are any areas in your budget that you can cut down on or eliminate.

There are the obvious things, like cutting down on the daily lattes and cancelling that magazine subscription that you haven’t read for 7 months. And even switching from branded to own brand at the supermarket.

But also take a look at your fixed expenses.

Use comparison sites like Compare the Market, Money Supermarket or The Cheap Energy Club to shop for better insurance and energy deals.

If you have credit card debts you could even look at shifting the debts to cut the amount of interest you pay.

Or try haggling with your service providers to cut your TV and Internet package.

I know, picking up the phone to call up these companies is pretty low down on my list of fun things to do too. But if you don’t ask, you don’t get. And the sad fact is that most of these companies don’t reward loyalty.

It might not sound like a huge amount, but all these small changes can really make a difference when you add them together.

Gives you peace of mind

A lot of people think that budgeting is restrictive.

That’s not true.

A budget sets you free.

When your money is under control, when you know how much you have and where it’s all going, that is one less thing for you to worry about.

And let’s be honest, it’s a pretty huge thing not to have to worry about.

And better still, when your budget includes a plan for your financial goals? That means you can spend your money guilt free, confident that you’re building something positive and moving towards the financial freedom that you dream of.

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