You’ve probably already experienced FOMO, or fear of missing out, at some point in your wealth-building phase. When you’re chasing wealth, you’re going to have to make a few sacrifices. It means missing a night out with the girls here and there or foregoing a trip. While building towards a solid financial future, you may miss out on some experiences today. Those are just some of the advantages and disadvantages of budgeting.
Budgeting and living on a budget is challenging, but it is one hundred percent worth it. Here’s why.
You might value some parts of your life more than others. For example, you probably view putting food on your table as more important than going to a concert. Learning how to budget and staying on top of your budget will teach you to be disciplined with your money. This will help prevent you from impulse buying or spending too much on unnecessary things. Setting your priorities is the first step in budgeting.
You likely have a financial goal, like owning a house or sending your kids to college. Budgeting gives you clear instructions to reach that financial goal in the set amount of time. For example, let’s say you decide to save up for a car. For general purposes, you won’t need the newest car with the latest technology. $10,000 can get you a fairly recent model that’s easy to find spare parts. To reach that, all you have to do is budget $300 a month for three years. This is the monetary goal divided by the number of months. In this case, it’s $10,000 over 36 months–which equals $300 a month!
While you can budget more depending on how soon you want/need to reach the goal, it’s not always feasible. Remember to set realistic goals; otherwise, you could be ignoring more urgent needs, like rent and bills.
This is just an example–in reality, you’d have to consider factors like inflation and market
When you live on a budget, building wealth-building habits, like saving, investing, and tracking financial goals, is easier. You allocate money towards these things ahead of time, which teaches you to live without certain luxuries. By learning to live with less, you’ll have much more money to spend and save.
Just because you’re budgeting doesn’t mean you’re not allowed to enjoy your money every now and then. We all have to make hefty purchases at some point, like a new phone, new laptop, or bike. Budgeting and buying these things when you’re ready lets you enjoy them without guilt! Here are a few things you might want to save up for.
You might not want to work your whole life, and the way to achieve that goal is to maintain a budget. The best advantage of consistently budgeting is that you’ll have the option to retire early. If you choose, you can quit your day job without worrying about money. This is only true if you’re budgeting to retire early, though. You’ll at least regularly put money into your retirement fund even if you plan to work into your golden years.
When you live on a budget, you’re bound to miss out on creating a few memories. It means you won’t always get to go on a trip or even out to dinner with friends. You won’t be able to make every hangout or go to all the places you want–and that’s okay. You’ll learn to live with less, but that doesn’t mean you won’t feel constrained.
There will be nights when you have to stay in instead of heading out with the girls. It doesn’t feel nice when you see their Instagram stories of them having fun while you’re at home. This is just one of the disadvantages of budgeting that you will have to endure.
Living life on a budget means sacrificing a few luxuries. It means commuting rather than taking an Uber or staying in more often than going out with friends. This can also be an advantage because you’ll learn to live without certain luxuries.
This is a real problem and is especially prevalent among young wealth builders. When you’re saving while everyone else is spending money, you’ll start to question your money mindset. It’s okay to be insecure about money; it happens to all of us. However, you should not feel peer pressured into spending.
Tracking your finances diligently takes quite a bit of time, and there’s no way around it. However, it is time spent working on your finances rather than other things that need your attention. After all, there are only 24 hours in a day.
It’s quite possible you might not know how to balance a budget. That’s ok! First, set your priorities–the things you need the most. This includes rent, food, transportation, and anything else you need to survive. Then you need to make the budget based on these priorities.
Next, you need to stick to your budget. This is the most critical step if you want your budgeting to be successful. Don’t be someone who caves into the disadvantages of budgeting and gives up, then misses out on the advantages.
Finally, pay yourself first. Take the money you allocate for yourself and use it! That means spending money on yourself as a reward for working hard. This can be anything, like a new outfit or setting money aside for dinners with friends.
Living life with a budget is all about balancing wants and needs. Speaking of wants and needs, you should always be on the lookout for sound financial advice. This is why you should join the money squad! As a member, you’ll receive free exclusive financial tips every week. If you want in, all you have to do is click the link and sign up! It only takes a few seconds. So what’re you waiting for? Sign up today!
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Dollars Makes Cents by Shaquana, Financial Coach and Wealth Expert, resources helps professional millennial women of color with the tools and skills they need to eliminate their debt, amplify their savings, and build generational wealth — without having to compromise their lifestyle.
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