Students and young adults have all heard about the importance of developing a budget. But, do they know why a budget is so important? Perhaps they simply spend what they must and save whatever’s left over. Or, perhaps they spend all they have and borrow or charge anything else that is needed. In either case, given the limits of their income, they may wonder, “What good would it do to have a budget?”
Whether one has substantial resources or lives close to their means, a budget can serve as an effective foundation for a savings program. It may be one of the best tools to help control personal and household expenses, thereby freeing up income that can be redirected toward savings.
So, how does a budget help accomplish this? Next-generation learners should consider the following six points:
- Putting your actual expenses down on paper may reveal several areas of misuse of your financial resources.
- Once you see where your money is going, a budget can help you conserve your financial resources or spend them more wisely.
- A budget can help you to anticipate financial problems that could arise from your present spending habits, thus allowing you to remedy the situation before you are faced with additional difficulties.
- A budget can help you recognize the need for an alternative course of action to achieve your financial goals.
- A budget can motivate you to adhere to a savings plan.
- Finally, a budget can help you evaluate your progress toward meeting your long-range financial objectives.
Whether one is starting to plan for education for a new child, focusing on early retirement, or a specific purchase, a budget can help boost your savings and bring your dreams closer to reality.