Chances are, unless you write the blog for a money app for a living, you probably don’t think budgeting is the most thrilling topic in the world. But, sadly, like eating vegetables and going for your stupid mental health walk, it’s really good for you.
So welcome to this TedTalk on why budgeting is important.
Including hacks for making your budget do the work for you, instead of the other way round. Get comfortable, you’re about to have your world absolutely rocked.
Why is budgeting important?
1) Budgeting helps keep you focused on your goals
The first rule of budgeting? Set a goal. This is your carrot, the thing you’re aiming towards.
Maybe you’re wanting to build savings, create an emergency fund (more on this in reason number 2) or just make it to the end of the month without overdrafting.
Setting a budget is a realistic way to make these goals happen.
If you have multiple goals when it comes to money, it can be easy to let go of all of them. With a budget, you can isolate these goals and tick them off one by one.
2) Budgeting helps prepare for emergencies
If there’s one thing that the pandemic showed us, it’s the importance of building an emergency fund. This is especially important considering that 64% of Americans are currently living paycheck to paycheck.
An emergency fund should be between 3-6 months salary.
The average American has $5,300 savings in checking and savings accounts, according to the federal reserve’s most recent Survey of Consumer Finances. But this amount varies a lot from person to person. It depends on factors like your age group and whether you have children or not.
💵 For those under 34, average savings are $1,350 for singles with children and $4,727 for couples without children
💵 For those aged 45 to 54, couples with children have the most savings at $15,589
💵 For ages 65+, couples without children have the most savings at $15,297
So. If you’re looking at this and you don’t have 3-6 months wages currently in the bank, you’re not alone. Now is as good a time as ever to start. You’ve got this.
3) Budgeting helps you avoid or get out of debt
You know that bit in Snow White where she’s walking through the spooky woods and all the eyes are following her? With so many companies out there that benefit from keeping you in debt to them, this is basically what it’s like when you’re short on money. Think predatory loan sharks and BS overdraft protection.
So it’s in your best interest to avoid this.
At the same time, not all debt is bad - maybe it enabled you to go to college, or buy a house. But chances are, you probably still want to get out of it. A budget can help with a debt repayment plan.
4) Budgeting is good for your self-esteem
If money’s a stressful topic for you, it’s easy to just do the old “lalalala I can’t see you” trick when it comes to personal finances. Building a strong budget helps when approaching your money feels overwhelming.
Money apps, like, ahem, Cleo, will track your spending and find out where your money is leaking to each month. She’ll even give you a cute visual of how much you have left to spend, complete with whimsical gold coins. Nice.
Sometimes this means shedding light on compulsive spending habits (hello late night Amazon binges). In fact, if you need to just assertively be told not to do this, Cleo will even roast you for it. And hype you up for all the good you’re doing.
Recent scientific studies have found a strong link between compulsive spending and low self-esteem. It’s not that you shouldn’t allow yourself the little treats that make living under late-stage capitalism bearable, but shifting towards conscious spending.
By tracking your spends, you’re able to divide this into what you need for essentials, what you can put away for savings (if you want) and what you can use to treat yourself. No shame involved.
5) Budgeting relieves stress
Life is stressful enough. You defo shouldn’t be carrying your budget around in your head, too.
The trick is to build a budget that works for you. And because it’s the 21st century, there are apps that can do this for you. Your notes app is carrying enough of your emotions without then trying to do your finances in there too.
You want to look for a budgeting app with an autosave feature, that transfers money into your savings, or automatically sorts your spending into essential and none-essential, leaving you clear on what money you have left to spend each month.
Check out how to create a budget with Cleo, and while you’re here...
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Big love. Cleo 💙