Are you concerned about your finances? On a general scale, nearly forty-nine percent of Americans are either fearful, anxious or concerned about their current financial situation, and nearly half are living paycheck to paycheck.This statistic comes as no surprise when only one third of Americans maintain some type of budget or have a long-term financial management plan in place.
Individual financial planning can be complicated,especially when you have already accumulated debt or are thinking about retirement. However, the importance of having a budget is not to be underestimated. Developing a detailed budget that breaks down your income and expenses will ultimately increase your wealth over time here's why.
Budgets Expose Spending and Inspire Goal-setting
One of the best parts about keeping a budget is that it is the most honest form financial management. Even though you may have had fun visiting cities around the world with your family last summer, you may not have accounted for major expenses in your yearly budget. Taking on large-scale expenses like travel, mortgages, or paying for college will be challenging without following a budget.
Even though it is okay to spend money, you will only increase your wealth if you spend less money than you earn. A budget can reveal where you might be overextending money, allowing you to sort out what your spending priorities are. In time, this will allow you to start small and set goals that your budget can help you reach. Knowing exactly where your money is going will allow you to come up with more realistic goals that you can happily, and actually, achieve.
Budgets Help You Track Your Investments
If you are interested in your personal finances and retirement, you have probably dabbled in making investments. While some people think that investing is only for the rich, this simply isn't true. If you are just starting out, having a budget that allows you to invest money in things like mutual funds may help you increase your wealth down the road.
With the right budgeting software, you can track the investments that you make from any place at any time. Certain accounts, like mutual funds, have average returns between 3 and 14 percent. This means that if you are wise about it and seek the help of a financial advisor, you can make successful investments all while keeping in line with your budget and growing your wealth.
By drawing up a budget, you can be aware of your spending, sets bigger, smarter goals, and keep track of your investments in order to increase your wealth over the long-term.
This article was written by and presents the views of our contributor Chrissy Carter, not the WiserAdvisor editorial staff. To introduce yourself to one of our advisor subscribers, please click here.
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