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Living without a budget is similar to traveling across the country without a roadmap. While both can be accomplished, the result is usually expensive and wasteful. The household budget lists every anticipated expense in major categories that can be directly tied to actual expenditures. Many people view the use of a budget as restraining and remedial, but most wealthy people have grown their financial wealth through the use of a strict budget.

Budgeting activities provide substantial benefits to personal financial health because the budget:

1. Acts as a roadmap – Creating the budget will reveal where every dollar is currently being spent. The visual representation of the actual expenditures reveals the direction followed. When the course being followed is incorrect, the budget can be used to re-route your plan.

The budget is a living document that must be updated with the changes that occur in your life.

2. Reveals waste – A detailed budget that is compared against the actual monthly expenditures will reveal the incorrect use of money. When money is spent on non-budgeted items, budget shortfalls are created and can be corrected. When you can identify a source of waste you can then take corrective action.

3. Aligns priorities – Family discussions over the budget can reveal differences in priorities that may often cause conflict. Conversations to address the underlying priorities will correct the problems and reduce disagreements over money. Since money is such a stressful part of marriage, identifying discrepancies before they become an issue can do a lot of good.

4. Builds new habits – Efforts to stay within the budget will build new spending habitsthat can be maintained over time. Working within the budget will shift actual expenses from unnecessary categories into the most essential household categories. Money will be available for the most important expenses and debt reduction becomes possible.

5. Reduces stress – Following the budget throughout the year gives everyone an accurate picture of the financial health of the family. Guesses are no longer required to determine if large purchases and vacations are affordable. When annual expenses are budgeted each month, sufficient funds will exist to pay the bill when it becomes due.

6. Controls spending – If expenditures exceed budgeted amounts, corrections can be made in the coming months to control the monthly flow of money. When outstanding debt is weighing on the monthly finances, the budget can show areas where spending can be reduced to find the money to repay the debt.

7. Coordinates efforts – Setting budget amounts allows every family member to provide input. If the family goal is to have an annual vacation, simple reminders can be given in response to why money cannot be spent on other categories until enough money is saved for the vacation. The budget acts as a barometer for the family finances.

8. Transforms money into a tool – Budgeting all monthly expenditures will change the mindset toward money. Instead of spending impulsively, money will be valued as a tool to reach goals and fulfill needs. Children raised under a budget will learn the value of money because they are involved in some of the decisions necessary to establish the budget.

9. Creates margin – Debt repayment and living according to the budget will move the family toward living within the monthly income. As less money is spent, excess income becomes available and is considered financial margin. These funds can then be applied to other financial goals.

10. Grows savings – Budgeting activities make money available to save some of the monthly income for various reasons. Short- and long-term goals can be reached through savings efforts that seemed impossible just months before a budget was created. Savings becomes the highest priority and money can be saved ahead of paying the bills since every expense is closely monitored and compared to the budget.

11. Accelerates financial goals – As margin is created within the financial budget and savings becomes a priority, the family can move toward major goals like funding college education for each child. Many goals can be set and reached because the budget has been used consistently to monitor the financial activities.

While budgeting requires some time in the early months, learning to maintain a budget will pay dividends in ways never imagined. Schedule monthly budget reviews and stick to a strict plan to bring the financial health of the family in line with the goals. Reward the family for staying within the budget and remember that not all rewards are monetary.

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