Much of the financial-planning advice, including in this column, sings the praises for having a budget. It’s typically the first step in balancing your expenses and saving for the future. But one point that is typically overlooked is how much a budget is essential in providing a quality lifestyle – even for those who are established financially.
For example, when you’re not sure how much money you’re spending and how much you need to put aside, you may get stuck in a constant status of mind that you can’t afford particular luxuries. You even may be seeking a job that pays more just because of your belief that you don’t have enough.
With that in mind, it is important for everyone – including those who aren’t struggling financially – to have a clear view of their income flow as well as their expenses. To motivate yourself think of the following.
More spending
Yes. For many people who were stuck between unemployment or a low-paying job for long time, they may have never updated their definition of what living within their means. As they get into better jobs and their savings build up, they now may afford a higher lifestyle. Taking a good look at your budget may help you define some disposable income that can be channeled into different upgrades of life essentials like housing, cars, etc. You even may find that you can treat yourself to something that you didn’t realize that you could afford.
Spend better
The fact that you make more than you need doesn’t mean that you’ve learned the financial discipline. It only means that your little splurges coupled negative spending habits can could unnoticed as they don’t really dent your big budget. Still it may be helpful to know how to abide with the basics of financial planning for two reasons: First, you get in the habit of practicing sound financial judgment, which can safeguard you from larger-scale financial problems. Second, when you realize the areas in which you’re overspending, you may be able to direct that money to where it can be put to a better use.
Invest in yourself
In pursue of career and financial status, almost everyone goes through phases of ignoring one’s passion – and perhaps health and professional development. When you know where you stand financially and you become more secure about your finances, you may be able to set time and money aside for activities and interests that have been neglected. Have you been thinking of pursuing graduate studies? Now you know that the required tuition can fit within your budget, making the decision may be easier at least as far as finances are concerned. Similarly, you may be able to practice a hobby that has been shelved during tough years.
Informed decisions
Making a financial decision without having all the information is a recipe for stepping in the wrong direction. Before you decide on financing a car or taking out a personal loan, taking a close look at your budget is worthwhile. If you’re living tightly as going from a paycheck to another, it is important to understand your need for credit. In some cases, you may find that paying for something in cash is a better deal than getting in a debt cycle – even if coming up with the cash requires some savings.
Keeping track
Having a budget through the good times will help you keep tabs on your income and expense, which in turn helps you keep track if a problem is happening. This can be a result of inflation, an increase in your life expenses or anything else. The more you’re having an eye on your financial resources, the better you will be able to manage them and be prepared for unexpected shocks.
Rania Oteify, a fomer Gulf News Business Features Editor, is a Seattle-based editor.
