In Unit 2 of this module, we were briefly introduced to the concept of budgeting & why it is necessary for personal finance. Let us now elaborate on this topic & discuss its benefits.
What is Budgeting?
A budget is a financial plan which you can use to allocate your income towards -
- Debt payments
The process of preparing this budget is called budgeting.
What are the Benefits of Budgeting?
Budgeting has many benefits.
- It can improve your lifestyle. You can stop living ‘paycheck to paycheck’ and save efficiently if you plan a good budget.
- Budgeting is the first step in moving towards your financial goals. Suppose your goal is to be able to save enough to deposit funds into a mutual fund every month.
- If you provide for it in your budget, you will understand what expenses you might have to cut down to save enough for your investment.
- When you save money by budgeting, you save it for your future. Therefore, a good budget can assist you in retirement planning as well.
- Making a budget can help you in creating a fund of additional money. You can use this fund in case of emergencies instead of borrowing unnecessarily.