4 Benefits of a Monthly Budget

It’s tough to visit a finance related blog without seeing an article encouraging the creation of a monthly budget. Without trying to reiterate what these article have already stated; budgets are important. However, rather than explaining how to create a budget, we’re going to explain the benefits of creating one and how they can improve your financial future:

It shows you where your money goes

How many times do you hear yourself saying; “I just don’t know where all my money goes”? Well with a budget you can see exactly where it goes.  By splitting outgoings into categories you can highlight areas where you are potentially overspending and then make relevant cutbacks.

Allows you to prioritise outgoings

Not prioritising your outgoings is dangerous as it can land you in financial trouble. For example, if you pay all leisure subscriptions (e.g. Sky TV, Broadband, Gym membership, Netflix and Spotify memberships)  and then get a hefty car repair bill and are unable to pay your rent or mortgage; you could risk losing your home. However if you’ve prioritised your outgoings so that rent or mortgage is number one on your list and you then receive a hefty vehicle bill and are unable to pay your subscriptions; the consequences are much less significant.

Monthly Budget

Highlights overspending

As I mentioned, splitting outgoings into categories will help to highlight potential areas of overspending. For example if you’re spending  £200 on entertainment each month but can only afford to pay the minimum payments on your credit card – then this indicates you should be cutting your entertainment costs and prioritising your credit repayments.

Goal-setting

By having a greater knowledge of your finances and indeed where your money goes, you can then start to set some finance related goals. We recommend you set three different types of goals; short term, medium term and long term. A short term goal would be to pay off an outstanding credit card balance or save X amount for Christmas. A medium term goal may be to get completely debt free or putting a certain amount in a retirement fund. Long term goals may be to pay off your mortgage, buy a holiday home or even save enough to retire.

It’s important that when goal setting you are both ambitious and realistic. Setting goals is a great way to motivate yourself, by incentivising goals with rewards you should find you’re never short of drive to succeed.

Conclusion

If you are one of the many that are yet to implement a budget to your finances then now is a great time to do so. If you want to save time then try using an online budget planner such as the one on the Money Advice Service website. Having entered all the relevant details, look for areas where you can make and in turn increase your disposable income. At first, working from a budget will seem alien however in time it will become second nature and you’ll rarely even have to think about it.

This article has been written by Jason Scott on behalf of UK Credit Loans. For more top budgeting tips visit their blog or follow them on Twitter @UKCreditLoans.