We work hard to earn a living. We should make sure we spend the money we bring home wisely. That’s where a household budget comes in. It’s a good tool to see at a glance what we have coming in, what’s going out (and what that money is paying for) and if there’s anything left at the end of the month to put into savings.

Financial health can be defined as the well-being achieved through good management of personal, family or business finances to be able to face unforeseen events and achieve vital and future goals. Having a budget gives us more control over where we want to really spend our hard earned cash. Maybe that’s fancy dinner at a good restaurant, a movie, spa, skincare, a luxurious vacation but maybe it isn’t. Wouldn’t it be nice to have an actual choice?

Before we dive into exactly what a budget can do for us, let’s consider for a minute what will happen if we’re not tracking income and expenses. We may end up spending more than we’re making in a given month (or two, or three). Over time that can put us into some pretty hot water financially. We may also spend a lot more than we’d like to believe on things like eating out, going to the movies or buying new clothes.

-It Tracks Where Your Money Is Going

A budget simply tracks your money. You record where the money comes from each month (your income) and then write out everything you spend it on, starting with your regular monthly bills like mortgage or rent, car payments, utility bills (cable, internet, home phone, cellular plans, water, electricity,) food, clothing in case you live in a country with 4 seasons a year, school, health, etc. What’s left after all the bills are paid is your discretional income.

-Helps You Identify Things You Waste Money On

Having it all in front of you in black and white helps you identify things you’re wasting your money on. It makes you reconsider if you really want to spend well over $200 a month on Cable TV or $150 on your large cell phone plan. Or how about that yearly magazine subscription to something you no longer read? Or going out weekly to drink alcohol that destroys your health. Go through your expenses and reevaluate if this is REALLY how you want to spend your pay check.

-Allows You To Be Proactive About Savings

Saving money without a budget is hard. We go in with the best of intentions at the beginning of the month, because there are so many necessary things on which we spend our money, but somehow there isn’t anything left at the end of the month. It’s something we go through all the time, right? Can you relate to that?

A budget gives you a chance to be a bit more proactive. Set aside some money for savings at the beginning of the month, even if it’s just $20. The smaller the amount you put aside, the luckier you will be to not spend it at the end of the month because your bills are already paid and there will be no need to spend it at all. Put it in the budget as a regular expense, just like you do with your other urgent bills. If you need to, open a separate savings account so you’re not tempted to spend it, do it!

-Ensures You’re Not Spending More Than You’re Making

Some people have a bad practice of spending more than they earn. Because they want to look like someone they are not. They want to live or to have a luxurious lifestyle. If you earn $1000 a month, your expenses should be for the $1000. You can save for any expenses that are more than you earn, but you should not take away too much money to save and be left with nothing. Most importantly, your budget will keep you on track and help you make sure you’re not spending more than you’re making. And I don’t have to tell you that that’s pretty important for your financial wellbeing.

In these difficult times it is very important to know how to manage your finances. Because any mismanagement can lead you to bankruptcy and this is not good for your mental health. Don’t forget to visit our shop and follow us on facebook, Instagram, twitter, Pinterest.

See you soon,

Ludmilla!