- Budgeting gives an accurate picture of your financial position. It will almost certainly
demonstrate that money is not being spent according to the priorities and will highlight
where changes in spending habits can be made and, possibly, where savings can be
made.
- Budgeting also helps make money go further. The fundamental aim of budgeting is
to ensure that basic needs are met and that, where necessary, steps are taken to
get you out of debt.
- A budget can be a very effective brake on large impulse spending.
- Budgeting can help prevent the running up of debts to the point where contractual
payments can no longer be maintained.
- It will help to reduce stress levels.
Evaluate your standard of living. Advertisers are constantly telling us that, as
consumers, we should happily gratify ourselves today with no thought of tomorrow.
Following this route exposes you to enormous risks, particularly if you use credit
to finance your standard of living.
As millions of people have eventually found out to their cost, there are no longer
many, if any, guaranteed jobs for life. When evaluating how you live you need to
think about what you would do if your circumstances changed dramatically.
Develop some form of cushion to help cope with a negative change in circumstances
rather than spending to the limit.
Set out your financial goals - these may include such things as a pension, savings
accounts for the children, etcetera. Then prioritise these and try to establish
how long it will take to reach these goals. Bear in mind that all your goals will
not be achievable immediately, but you may need to start planning for them now.
If you feel your situation is spiralling out of control, start to buy everything
on a cash basis.
When you are thinking of buying something that is non-essential ask yourself whether
it is something you or your family really need or whether it is something you just
want.
Don't be afraid to haggle over prices, especially if you are paying cash. A cash
customer is in a much stronger position to bargain than a credit customer.
