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Why a Detailed Budget is Crucial for Financial Success

Many individuals think that if they can simply earn more money, they will automatically be better off financially. However, many households that are earning six-figure incomes have found that they are still struggling to make ends meet because they haven’t taken the time to compile a budget that would allow them to see where their hard-earned money is really going. 

If you’d like to ensure that your finances work for you over time, now is the time to compile a detailed budget.

Help Control Spending

When you use money without having a budget in place, there’s nothing to stop you overspending. Although you may have a basic idea of how much you’re spending each month, it’s too easy to overspend without having accurate figures on hand. 

When you and your spouse sit down and compile a list of where all of your money has been spent, you’ll quickly be able to see which categories of your budget are prone to overspending. For instance, you may find that your daily takeout lunch habit is setting you back to the tune of a few hundred dollars a month.

Achieve Financial Goals

Regardless of whether your goals involve having a good-sized emergency funs, paying for your child’s college fees or enjoying a dream vacation, having a detailed budget will help ensure that you’re able to allocate funds to the life events that matter most to you. For instance, knowing that you have an emergency fund will reduce stress levels in the event that anything goes wrong because you won’t have to worry about how you’ll be covering an unexpected expense.

Avoid Debt and Improve Credit History

Your budget will help you identify areas where overspending is taking place, which will in turn help you avoid racking up unnecessary consumer debt. If you have already accumulated high levels of debt, a budget will help you identify areas where spending cutbacks can take place and the savings incurred from them can then be put towards repaying your creditors. 

Compiling your Budget

When compiling your budget, you’ll need copies of bank statements as a starting point. These will allow you to see exactly where each dollar has been spent in previous months, making it easier to determine where spending reductions can be made. For instance, your bank statement will show how many times you purchased takeout in a specific month or how many subscriptions you’re paying for.

Once you have your bank statements on hand, carefully check to see which expenses are being deducted from your account – in some cases, a subscription you canceled a while back may still be getting charged to your account. If your expenses exceed your income, spending will have to be reduced – many households can trim expenses by purchasing cheaper grocery items, canceling unused memberships and only purchasing clothing when absolutely necessary. 

If you’re struggling to compile a workable budget or you’d like to obtain financial advice from experienced professionals, contact us to set up an appointment today. We look forward to assisting you.