Money Education

9 Reasons Why You Make a Budget


Adnan Ul Haq

Module 4:Money

9 Reasons Why You Make a Budget

Adnan Ul Haq

9 Reasons Why You Make a Budget

Budgeting is like watching a reflection of your expenditures and revenues in a mirror. You get a clear picture of where you are spending excessively and where you are falling short on money. 

Budgeting has numerous benefits for your personal life as well as your financial management. Here are the nine major gains that budgeting offers:

  • Tracking Down Your Expenditures

You get a clear picture of your expenditures. You are able to track down where you spend money. Which of those areas are your needs and which of those are your wants. 

  • Exposes Income Deficiencies

Budgeting helps you know the income deficiencies. By income deficiencies, we mean the necessary expenditures which require money but you are falling short of it. 

For instance, you are aware that all your basic needs can be filled in PKR 1 lac per month, however, you are able to make or earn PKR 90 thousand only. This tells you why you are forced to borrow money on the 10th of every month. 

  • Helps Locate Exessive Expenditures

Budgeting will help you understand where you went wrong with your expenditures. When you note down your expenditures you will see where you are spending excessively. Then you are able to question yourself whether those expenditures are necessary or not. So, in this way you can locate your excessive expenditures. 

  • Unveils the Black Sheep of Your Family

Budgeting will unveil the black sheep in your family. Black sheep of your family are those people who are spending excessively or may also override the budget. Once you are able to locate them, you can ask them to control their expenditures or allot their money accordingly. 

  • Forces You to Invest

Budgeting will put forward a list of all those expenditures in front of you that are necessary and it will also show you your income sources. This will eventually force you to invest your money to generate assets and cash flows that will ease your budget and increase your income. 

  • Setting Financial Goals

Budgeting aids you in determining your short-term and long-term financial goals. It assists you in not just setting the goals but also gives an organized plan to achieve those goals. 

Thus, when you make a budget it is easy for you to track down your financial trajectory and you will know where you have to reach in 5 years or 10 years down the line. 

  • Realizing the Erroneous Expenditures

Budgeting will help you realize where you shouldn’t be spending money, or which are your erroneous expenditures. This will in turn help you in saving the money that you haven’t earned yet. For instance, you won’t be buying clothes on a credit card. 

When you have a clear picture of your expenditures you understand that the money is yet to be earned for those expenditures. 

  • Creative Solutions to Make Money

Once you have a statement of your expenditures and revenues in front of you in the form of a budget, you understand that your income is not enough to meet your expenses. This compels you to think of creative solutions to make money. 

Such solutions can be an income-generating activity or an investment as well. It majorly depends on the ease of the earner. For instance, you could simply give home tuitions, or you could buy a shop and rent it out to generate passive income. 

  • Gives You the Ultimate Control

When you start budgeting, your money doesn’t control you, in fact, you control your money. You are in charge of the money that you earn, your financial management, and your investments. 

This control of your finances will relieve you from the worries about making the ends meet. So, you will not be suffering from financial stress anymore!

In a nutshell, your budget can be called a detailed statement of your income and expenses that assist you in multiple ways. But most importantly, your budget paves your way towards financial independence. You get control of your income and expenditures and it also compels you to invest in real assets whose value appreciates over time. This will ultimately generate passive income for you. 

All in all, you’ll earn and spend smartly and will retire with peace knowing that you have enough money to hit the road.