By Maddie Willson
What is your next expense? Rent, groceries, insurance, electricity? Or maybe you want to buy a new car or go on a holiday? If you have come to the realisation you can’t afford it and must borrow, borrow, borrow, then creating a budget might be just what you need!
Why you need a budget
The word ‘budget’ can have negative connotations, similar to those of the word ‘diet’. Both acting as constant restrictive reminders of what we cannot have. Like dieting, people assume budgeting is limiting, time constricting and really hard to stick to. Despite these negative connotations, a budget is an extremely useful tool in the management of finances and when used properly leads to less stress and ultimately reaching goals. A budget can help get you out of debt, save for unforeseen emergencies, save for holidays and help you to establish the lifestyle you desire. By budgeting your expenses and income for a specific period it stops you living from one pay packet to another constantly struggling to find money for those gruelling life expenses.
With a budget in place there are fewer financial problems and less stress. The successful implementation of a budget (whether for your business, or personally), will not stop you from spending; it will ensure you have a handle on your expenses and required payments. Business owner, Judy Jannusch of Jannusch Shoe Repairs said, ‘budgeting makes me more conscious when ordering stock or incurring an expense’, assisting her to maintain more adequate stock levels, whilst knowing that she still has enough surplus funds to make other business payments. On a business level, creating a budget can be instrumental in uncovering shortfalls or potential business problems before they arise.
When setting up a budget, it is important to be realistic and set appropriate targets. If your targets are unrealistic or you place harsh spending restrictions on yourself, it can create a stressful and taxing environment. As mentioned by Judy from Jannusch Shoe Repairs, budgeting gives them a better handle on cash flow and business targets, allowing them to feel more in control of their income and expenditure. Businesses then have the ability to compare their actual figures against their budget, which is a useful tool to assist in analysing the performance of the business, and identifying possible future issues.
So forget borrowing money for those next expenses. The ability to reduce your financial stress and create a more balanced lifestyle, are just some of the positive effects that arise from creating your own budget. Just remember to be realistic and stick with it!