Most of the time when we are engrossed with achieving certain life goals like starting a business or owning a house, finances pose a serious issue. But taking a second look at this, you might just figure out that, making a financial plan is the main issue and not the finance itself. And so we could say, making a good budget of expenses while making your personal finance is a great tool for achieving that life goal.
What is Personal Finance?
Personal finance is a term that encompasses managing, saving, and investing your money. It involves budgeting, banking, investments, mortgages, insurance, retirement, and tax planning. Personal finance helps you meet both your short and long-term financial goals if it’s done properly. It is a way of making a financial plan in order to achieve a short or long-term goal and this takes into consideration your income, expense, and how you set out to achieve the goal within your financial capability. Setting out budgets or budgeting is an important aspect of personal finance and it must be done if you are to achieve your financial goals.
Budgets and Budgeting
Budgeting involves the process of tracking your income and expenses for some period of time. It is important because it helps you to monitor the amount of money brought in, spent, and saved over some time. A budget is thus, a financial plan that helps you set out how much you will spend and save from a particular amount, be it daily, monthly or yearly. It is essential as it helps you to make a better financial plan and achieve your financial aim. Many a time, a lot of people sees budgeting as not important to do, but it sure helps you to eradicate all form of unnecessary expenditures when it is done properly. With adequate budgeting, you are most likely to meet your important financial needs while also saving for the future. In preparing a budget for your monthly and yearly needs, you are required to make a list of all expenses that are made. With that said, we would take a look at what expense is.
What are Expenses?
An expense is an item, good, or service that you make payment for in exchange for it. The expense could be in form of a house or land bought, it could also be groceries purchased or money paid for the repair of your automobiles. Expenses are core to budgeting since you can only make a budget based on the expense that will be made.
Is budgeting Important in Personal Finance?
Budgeting is an integral aspect of personal finance since it helps you with your financial management. Below is the importance of budgeting to personal finance.
- Budgeting helps you to be more financially stable since you can easily make a plan of all the expenses that will be made
- It makes you prepared financially even in the face of uncertainties and emergencies
- It saves you from debt and helps you ensure that you do not spend beyond your capability
- It helps you save for retirement and old age
- It is a sure process to go through if you want to eradicate unnecessary or lavish spending
- It helps you to quickly achieve your long-term goals like owning a house, starting your business, etc.
- Generally, it makes you more disciplined and it gives you proper & planned control over your income and expenditure
Budgeting is so essential if you are to make a life-changing financial plan. Whether you have a short or long-term goal in mind to achieve, setting out your budget is core to achieving it. It is by far the surest way to limit unnecessary spending and achieve your financial goal.
