How Proper Budgeting is the Key to Overcoming All Financial Challenges - Rest Nova Site

How Proper Budgeting is the Key to Overcoming All Financial Challenges

How Proper Budgeting is the Key to Overcoming All Financial Challenges

If you’ve felt overwhelmed by trying to create a budget, you’re not alone. One of the biggest reasons many avoid making a budget is because they’re not sure what it would accomplish. If you’ve wondered what the point of a budget could be, here are three significant challenges a proper budget will help you overcome.

The right budget ensures you’re never in debt

Having a budget that adequately accounts for your income and expenses will prevent you from ever coming up short at the end of the month. By understanding how money flows in and out of your life, you’ll be able to prevent yourself from spending money haphazardly or ever missing payment deadlines.

If you’re in debt now, then make it a priority to become debt-free so you can get back on track towards a financially stable future. Start by using a debt repayment calculator to create a strategy for getting yourself out of debt permanently.

A budget make sure you’re financially protected from emergencies

Those who have good financial health know that having a savings category in their budget is non-negotiable. By putting money aside every month in an emergency fund, you’ll have the peace of mind knowing that whatever comes your way will not prevent you from maintaining your quality of life.

How to start an emergency fund

If you’ve never used an emergency fund or aren’t sure how much you’ll need, then start by creating a savings account with a bank that has no minimum balance requirement. Your account should have a link to your checking account but no checks or debit cards attached to it. The emergency fund should be difficult, but not impossible, to access so that you can’t be tempted to use it for something other than its intended purpose.

Once your account is set up, transfer 10% of whatever is currently in your checking account into it to get it started. From there, commit to putting 10% of everything deposited in your checking into the emergency fund. If you can devote more than 10%, that’s fine, but finding a number you can consistently transfer is the key.

How much should I have in an emergency fund?

The amount you need in your emergency savings depends on what makes you feel financially secure. At a minimum, you should have $1,000 to keep you afloat should any emergency bill come before your next paycheck. From there, most experts recommend saving anywhere from six months to a year’s worth of expenses.

Proper budgeting plans for now and the future

A good budget will account for the expenses you have to pay now and the costs you’ll have further down the line. Your future expenses could be anything from a wedding, a new baby, or moving to a new home, to retirement, or any major cost you expect to pay later.

By adjusting your budget to include saving for the future expenses you know will come, you’ll never wonder how you’ll be able to pay for the life you want. Set up a retirement account if you haven’t focused a portion of your income on future expenses and aren’t sure where to start. If your employer offers any sort of 401k match, take advantage of it as quickly as possible since it’s essentially free money.

The sooner you begin saving for retirement, the more you’ll be able to utilize compound interest to grow your nest egg with minimal effort. Once your retirement account is set up and has begun to accrue a steady stream of deposits, the next goal is up to you. Decide what’s most essential for you in life and allot money for it in your budget so that you can make it happen.

The bottom line

Budgeting can feel complicated for those who’ve never done it before, but all a budget does is ensure you have money for everything you need in life. Give a few of these considerations some thought and decide what goals you want to accomplish by using a proper budget. Even if you start small and just account for your monthly expenses, you’ll be well on your way towards a stable financial future.