Many individuals often get surprised about where their income goes or if they lose their job, and how they are going to meet the necessary expenses till getting another job. This makes them overwhelmed to find the right solution of it. As estimated, nearly 75% of individuals struggle for managing their spending within their income but unfortunately, they cannot make it done. According to the renowned financial management expert Scott Tominaga, it is just because most don’t follow budgeting. The professional has served across industries including banking, personal and business finances, stock trading, and as of now devoted himself as a financial advisor.
What is budgeting?
Precisely, budgeting refers to the process of having a plan for spending money. This enables people to determine in advance if they have adequate money to pay for their essential needs and things they wish to do. So, it just helps balance spending according to one’s income.
Importance of budgeting
Gets a 360-degree viewpoint of the financial position
With a budget in place, people will get a crystal-clear view of the quantum of their monthly income and how much can they afford spending keeping in account the savings for meeting their financial goals and emergencies.
Helps in bringing expenses in line
A great budget suggests paying all debts, bills and equally to account for an amount of savings. This means first one need to list down his/her needs and wants. Needs will include everything like paying mortgage EMI, rent, bills, all necessary family expenses, and savings including insurance. Want typically defines the desires like entertaining, traveling, dining out, etc. Contextually, while people must not compromise their needs, they have a space to minimize their ‘wants’ so that they can save money for rainy days, investments, etc.
Helps meet financial goals
Having a budget help to decide the financial goals and save up money for that particular account. For instance, saving for a daughter’s marriage, a son’s higher education, saving for a venture one like to start after 10 years, etc. This helps in redirecting the money from pointless expenditures to meeting vital life goals.
Reduces unnecessary borrowing
According to Scott Tominaga, the whole idea of having a budget is that it helps people manage their spending habits within their means or income and thereby prevents them from borrowing funds pointlessly for small to big expenses. Spending thoughtfully on unwanted things curbs bad spending habits as more and more money is redirected to paying the debts faster. Clearing out debt faster stops people from paying high interest on their mortgage loan or personal loan.
Helps people plan big expenses beforehand
As a family man, every individual has some commitment to their loving family members and equally, they need to participate in social events for which they will have extra expenses. Having a budget helps in logically planning for those expenses and thereby people follow bugeting do not need to borrow money. For example, the time of festivals, gifts for weddings, or having a delightful vacation with family members.