I have $100,000 saved up in bank accounts by following good frugal practices that you and others outline. I however don’t budget and never keep track of my expenses. I know I’m saving money because my account grows every month. Why should I budget …
There are many reasons to make a budget and keep track of all expenses apart from growing a surplus. I admit that it is actually very difficult to keep an expense tracking system up-to-date because not bothering to update it doesn’t have an immediate effect on us. However, maintaining a budget is like maintaining a bridge. There may not be problems even if neglect maintenance for a long time, but consequences can be disastrous when an accident finally occurs. Below are some more reasons why you want to maintain the bridge:
Builds Discipline and Organization
Having a budget really helps you stay disciplined to organize your finances, which is the first step of knowing your overall financial health. Without easy to read data, there is no way of knowing what is going on.
Forces You to Think About Money
This is a side benefit of having a budget but it is an important one. The more time you spend thinking about your money, the more focus you are in building your wealth. Once you start thinking about money often, you will find that you are able to find more ways to save and more ways to generate income.
Looking through your finances at regular intervals will allow you to spot trends and see areas that can be improved way before it becomes a problem. By preventing crisis from starting, you are way ahead of everyone else who can only react.
Great Tool to Start Family Discussions
Money is always a hard subject to discuss. If the whole family is involved in budget making and expense tracking, it makes discussions much easier. It is always a good idea to just lay out the facts when talking about money matters and the expense tracker is the perfect tool to aid in this regard.
Quantifiable Way of Measuring Progress
In theory, we all want to reduce our spending and make more money but it is impossible to know how we are doing without actually keeping track of your progress. Budget tracking to measure progress is not just a benefit but a requirement.
Without a budget, how do we know that we are meeting our goals?
Knowledge is Power
By keeping track of your budgets, you will know exactly how much money you actually need on a monthly basis. Equipped with this knowledge, you are able to plan and build an emergency fund that you know has sufficient cash. You can also easily figure out how unexpected issues like losing a job or having a child will affect your financial health.
Knowing your exact financial situation lifts a tremendous amount of stress off your shoulders because you don’t have to worry about the unknown. Even if your financial situation is shaky, you will be spending time fixing the problem and not trying to find out what the issue is.