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Why Have A Budget?



by Paul Hegarty

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Budgeting is a chore people put off indefinitely. They know the bills pile up; the only time they jolt out of complacency is when they have to pay them.

This creates a problem. The difficulty is created due to the fact that you deal with matters as they arise. So you have no organization or direction. You do not put yourself in a position of anticipation.

Why do we need a budget, family or individual? This question may sound silly, because it is so obvious. A lot of people know the importance of it, yet do not have one. Often those who do not budget have poor discipline in spending.

Let's say one earns $2000 a month net. In your budget you save 5% of your net earnings. Secondly you pay rent or mortgage which costs $700 a month. Then you have living expenses, such as gas for the car, utilities, food, credit card bills, and recreation.

With a written budget you can see the interest charges on your credit card. The budget helps you to see how much the interest charges cost. You now see that making your current payments how long it would take you to pay it off. Believe me this is an eye opener, which can make you think twice before charging itmes to the credit card in the future.

So one of the advantages of having a budget is that it helps you to pin point costs along with when and where you may be spending too much money. The problem may not be that you need to earn more money; it may be that you budget needs some attention. You can, when you are attentive, bring it back to health. This puts you in a position of anticipation.

Some folks would say that they can do all this in their head, that is fine, however you cannot remember everything. When it is not written down you are not as committed. Those who do not have a budget written down are in danger of spending beyond there means. When I know I earn $2000 a month and I want to increase spending or pay off credit cards, then I know I need to set a detailed goal on how I can earn an additional $300 a month in order to achieve that.

When I do not have a budget then what? A budget is only important to you, if you deem it so, but factually you see how it works, and how it can improve any given situation.

So having a budget and writing things down reveals the truth of a financial situation in a given set of circumstances over a certain period of time. Writing something down is thinking in action. This action takes place by physically taking the time and effort to write it on paper. This helps you to see your current situation in an objective sense. Then it is up to you to deal with or not.


Information About The Author

Paul Hegarty is the owner of LearningFromDVDs.com, your guide to Accounting DVDs, the site that makes learning fun and easy for all ages.


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