Budget – A Great Financial Management Tool

A carpenter uses a set of house plans to build a house. If he didn’t, then it’s possible he may overlook the bathroom. Without a detailed set of design specifications, scientists wouldn’t consider starting construction of a new booster rocket. Going blindly out into the world without an inkling of what finances are about and without having any plan is what most of us do.

Your budget is your money plan and it’s crucial that you get to your desired financial goals. If you have a spouse or a significant other, you should make your budget together. Are your joint financial goals long term or short term. Then plan your route to get to those goals. Every journey begins with one step and the first step to attaining your goals is to make a realistic budget that both of you can live with. Consider your income, the fixed expenses such as rent or mortgage payments each month, and the other bills you both have to pay.

When it comes to a budget, it should never be a financial starvation diet. For the long haul, that won’t work. Set aside a reasonable amount for entertainment and occasional luxury item and make reasonable allocations for food, shelter, clothing, insurance, and utilities. Before you spend on luxury items, savings should come first as well as necessities. Before you consider splashing out on luxuries, financial experts recommend that you have at least 3-6 months income saved and those expenses shouldn’t come out of your savings.

There are necessary expenses each month and both partners must agree on these. Your partner doesn’t have to forfeit their gym membership just because you don’t like going to the gym. There will be things that each of you consider essential, but the other partner does not. Try to reach a compromise on these types of items. An example would be you having $200 to spend on items you consider essential if your partner’s gym membership is $200 a month. But because there has to be a limit, you’ll both have to compromise if you’re serious about reaching your long term goals.

Even a small amount saved will help you reach your long term and short term financial goals. You and your partner sticking to your budget means reaching for those goals is easy as well as preparing for unexpected expenses and emergencies.

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