Why Everyone Needs A Budget

Why Everyone Needs a Budget

As I spend more time in the financial industry, it seems like budgeting is something that many people avoid, feel guilty about not doing, or don’t do because they think it’s not necessary for them. 

I believe that it’s wise for everyone to make and follow a budget. 

For those in debt or living paycheck to paycheck it’s necessary to live on a budget just to meet their needs. It’s also important for those who have their needs met and are at or near retirement, so they know how to make the most of their resources.

Budgeting is looked at as a constraint by some. I believe that working a budget is freeing. It allows us to spend money first on our basic needs, but then we can focus on allocating money to what is important to us. Personal finance expert Ramit Sethi refers to this as “living your rich life.” Every rich life is different. Some include travel in their “rich life.” Others prioritize things like going out to eat more, funding education, retiring early, giving, or purchasing their dream home.

It’s near impossible to properly plan for retirement without knowing expenses. The risk of running out of money in retirement is much higher without a budget. People in these situations also tend to live with a scarcity mentality, feeling that there is never enough. Budgeting gives people permission to spend money on what’s important to them and their family guilt-free. 

For those who have plenty of money and are content with their lifestyle, one might think a budget is no longer needed. They may spend as little as possible because they’re used to it. A significant amount of their money may go to savings, but what is it for? Is there a plan for those resources? 

Deciding what is important to you and your family and creating a budget from that is key. With additional savings, some choose to give to charity, increase lifestyle, or give inheritance early while living. A budget allocates resources based on your “why.” 

If you would like help getting started with a budget or you’d like a second opinion on your current plan, contact our team at MainStreet Financial Advisors. 

Joel Macyauski, CFP® – MainStreet Financial Advisors