Year after year, creating a budget is one of the most popular New Year’s resolutions people make. But it’s more than just a fad. Here are four practical reasons why you need to make a budget for the new year ahead.
1. Be Prepared for Emergencies
Perhaps the biggest benefit to budgeting is how it will prepare for the unexpected. This spending plan helps you prioritize your expenses, making sure you can pay your bills and save money.
With the right budget, you can set aside some cash into a savings account. Each month, these savings will grow bit by bit until eventually, you’ll have an impressive emergency fund.
A well-stocked emergency fund can help you handle life’s toughest financial moments—like when you have to field an expensive plumbing repair, replace a car tire, and take your cat in for surgery in the same month.
You can still cover these expenses without it, but you may have to take out a personal loan online. A financial institution such as MoneyKey makes it easy to research your options.
You can rate shop for a loan over the phone, even as you wait in the vet’s waiting room. Once you find something that works, most online loan applications are short and sweet, so you don’t have to waste time with red tape.
2. Kick Debt to the Curb
A budget can help you target your loan and line of credit payments — whether you relied on a loan online for an emergency or wracked up some credit card debt over the holidays.
While these financial products can help you in a pinch, their monthly payments can take up a big chunk of your paycheck. Paying them off faster may come with the following perks:
- You’ll free up the cash that usually goes towards these online loans, so you’ll have more breathing space.
- You’ll reduce interest and finance charges by lowering your revolving balance on a line of credit or credit card.
The faster you kick debt to the curb, the faster you can use your money in other, more fun ways.
3. Eliminate Financial Stress
If you’re feeling stressed out over money, you wouldn’t be alone. Most Americans (90%) say their finances impact their stress levels, and not in a good way.
The ability to afford retirement, a home or a new car makes it to the top of their worry lists. However, some people are anxious about everyday expenses like leisure activities and groceries.
A budget can be a soothing balm to your mental anguish, as it’s an accounting of your cash flow. You can pinpoint areas that need work, like overindulging in subscriptions — something the average American spends $273 on each month — or not earning enough.
By cutting non-essentials, earning more, and prioritizing your bills and savings, you won’t be as worried about the future.
4. Freedom to be Spontaneous
The humble budget has earned a reputation for helping you handle life’s toughest financial situations. Just look at the list above — financial stress, debt, and emergencies are no joke.
But the importance of these financial tasks can overshadow an overlooked perk to budgeting: the freedom to be spontaneous.
When you balance your budget properly, you’ll assign a portion of each paycheck to go towards fun stuff. You won’t have to pull out your calculator any time you want to do something different; you can indulge in that spa trip or buy a pair of sneakers without worrying about the future.
Bottom Line: A Budget Helps in a Big Way
Whether you like to set multiple New Year resolutions or just one, make sure you budget in 2023.