COPYRIGHTED MATERIAL
III. The Benefits of a Budget Yes, making a budget takes effort and is generally not a pleasant way to spend your time. But do you know what takes even more effort and is considerably less pleasant than making a budget? Stressing out night and day about money because you have spent more than you have coming in. In addition to reducing stress, a budget has many other benefits: Knowledge is Power. If you want to be the boss of your money instead of being constantly at its mercy, you need to stalk it. Know where it goes, what it does and if it’s doing what it’s supposed to be doing. There’s no such thing as TMI when it comes to your own money and personal wealth. A budget provides the intel you need to control your money and grow your wealth. It’s Your Job . Remember at the start of this course you learned that building and preserving wealth and financial security is like a second job? Making a budget is part of that job! Making a budget isn’t much fun, but no one said reaching your financial goals would be easy. Keeping your spending within acceptable levels makes it far more likely that you’ll stay on track. Budget Bust Alarm. Warning, warning, you are entering a financial danger zone! A budget can help you spot potential money problems before they become a disaster . Let’s say, for example, you want to buy a home and have saved enough money for a down payment. How disappointed would you be if you lost out on the house of your dreams because your DTI (debt-to-income) ratio was too high for you to qualify for the mortgage? A budget makes it easy to spot problems like that in advance. A budget will warn you when you need to adjust your spending. Spotlight on Waste. Where does it all go? Almost everyone wastes some money every month. Having a budget reveals a lot about you and your wasteful spending patterns , such as the gym membership you keep paying for but never use, or the shopping sprees you hope will make you feel better after a fight with your significant other. Spotlighting waste enables you to tackle it by cutting back on spending, recognizing your overspending triggers, shopping for cheaper products and services, and finding ways to stretch your dollars. Late fees, penalties, and other fines, such as parking tickets, eat up your wealth, so include a category for tracking those. Every dollar saved preserves and builds your wealth. Harmony. At some point in your life you may marry, raise a family, and hopefully live happily ever after. Do you know that one of the biggest bones of contention in a relationship is money? If you’re sharing a financial future with that special someone, it’s critical that you are on the same page with financial goals and spending habits . You are a wealth building team. A budget is a mutually agreed upon game plan which both partners can look to for structure and direction in building and maintaining wealth (and their relationship). A budget facilitates more effective communication about money, promotes teamwork for wealth-building and wealth-preserving, and reduces conflict on how money is spent. Reflect on Learning: What would a budget reveal about your personal spending habits? Do you have a friend or significant other who’s spending habits are incompatible with yours, such as impulse buying, going out too frequently for restaurant meals, or overspending on entertainment? Do you waste money? If so, what do you waste money on and how can a budget help you stop? PRODUCT PREVIEW
THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY 267
Made with FlippingBook - Online catalogs