“A penny saved is worth two pennies earned after taxes.”

- Randy Thurman

The art of budgeting is one to which the saying 'practice makes perfect' fits like a glove. It is one which, if done right, could give flight to all your aspirations. If you find yourself scratching the bottom of your piggy bank at the end of every month, budgeting is all you might need. In this blog, we are going to see the significance of budgeting and how this skill can be acquired. 

Financial experts define budgeting as the process of preparing detailed projections of future amounts. For you and me, that translates to having enough money stashed aside for the future; be it for a holiday, investments in financial securities or just a rainy day.  

Significance of Budgeting:

• It helps you stay focused: Budgeting gives you a game plan. It keeps you on course for your goals and ensures you aren't aimlessly shelling out cash, any chance you get. In fact, according to a poll conducted by Debt.com in the year 2019, 50% of individuals within the age group of 22 and below budget. Within the age groups 23-38 - 74% budget, 39-54 years of age - 67% and 55 and older - 67%. A quote to live by when it comes to budgeting is, "If you can't buy it twice and have more than thrice that amount still left, it's too expensive."

• You have enough to spend on things you really want to: Whether it is a trip to a theme park, dinner or one extra movie; or something in the remote future like a higher degree, a vacation or planning a wedding, all of it takes money. Spending on daily travel and food, are factors that cannot be compromised on. However, how much you spend on them, is what makes all the difference. For example, investing in a good quality container and carrying food from home would reduce expenditure on food and also have prominent health benefits. 

• Offers relief during emergencies: On a rainy day, the last thing you want is to be scrabbling towards your wallet only to turn it upside down and find it empty. To steer clear from exactly that kind of situation is why we need to budget. 

Now that we have learned how focal it is to budget, let's discern a few methods to recognize how we could.

Step 1: Planning

The key to being prepared for your financial future is planning. This step is the very base rock to possessing a sustainable budget. It involves being realistic, not idealistic. It requires you to work through your finances step-by-step; to pen down all your injections and withdrawals. It's about setting a goal and designing a blueprint to achieve it. All that necessitates is to decide what you want and ascertain how much money you will need to get there. 

Step 2: Let Your Money Make Money

Investments, mutual funds and stock markets have proven to be gold mines for many. Although people wanting to make a quick buck turn to stock markets, mutual funds have seemed to show more promise over the years. Money sitting idle is money wasted. One of the best ways to make money is to let your money do it for you. Investments are integral to that concept. To be able to invest, you must have enough kept aside, for which again, you must budget. According to Dave Ramsey, "A budget is telling your money where to go instead of wondering where it went."

Step 3: The 50/30/20 Budgeting Rule

This rule encapsulates how to divide your income into three sections where you spend 50% of your income on essential requirements, or 'needs', a maximum of 30% on your 'wants', and a minimum of 20% on your savings or investments. Thomas Jefferson said it best, 'Never spend your money before you have it.'

As we come to a close, we have emphasized the indispensable need of budgeting - its aid in maintaining focus, allowing for expenditure in areas one truly desires and as an emergency fund. We have also elaborated on measures we can take to develop it as a skill - financial planning, allowing money to make money via investments and lastly, the 50/30/20 budgeting rule. If you have been losing sleep over your finances every month, it's time to get cracking on a new budgeting plan.