Managing your money well is all about careful planning. It's easy to let your spending get out of control if you don't know exactly how much of your money is 'disposable income'.
Putting together a budget to help you keep on top of your finances has a whole host of benefits. Here are some of them:
Cabot Financial states that disposable income is the amount of money that you and your family have available for spending and saving after direct taxes (such as Income Tax, National Insurance and Council Tax) and all outgoings have been deducted. It includes earnings from employment, private pensions and investments as well as cash benefits provided by the government.
1. Gives you control over your money
Knowing that you have a good budget to use each month will give you the confidence of knowing you're in control of your money. It beats the 'spend and hope' approach where you don't pay attention to your bank balance and hope there is money left in your account when you come to pay.
2. Helps you focus on your financial goals
Planning for the future and working to an objective allows you to plan big purchases, like houses and cars, without worrying you'll miss the mark. If you can stick to your budget, putting money aside or having more disposable income can become easier.
3. Keeps you on top of what you're spending
You'll be surprised at how much you spend on essential things, like bills, rent/mortgage, and food. Most of us will have vastly underestimated our monthly or weekly spend by forgetting how much we spend on other items like TV license and commuting.
4. Makes it easier to stay aware of your savings and debts
We have already said that the budget planner helps you stay on top of what you are spending. But what about the money you are putting away or using to pay off debts? A good budget keeps you aware of when your debts will be paid off and a little extra money will be freed up to be redirected into savings or that occasional treat.
5. Helps you to save for unexpected costs
It's always safe to expect the unexpected. If your boiler breaks in the middle of winter, or your oven stops working, you'll want to make sure you have some money set aside to deal with it. Careful budgeting can help take the sting out of unexpected bills.
6. Makes talking about money with your family easier
Talking to your family about when you need to tighten the purse strings and when to spend helps keep them know what's happening with the family finances. This should help the entire family work together when it comes to healthy spending.
7. Shows you where money issues are likely to come from
Much in the same way a guard dog alerts you to danger before you see it, a proper budget will show you where the risks to your financial stability are. If things look a little tight, you can address them before they get out of control.
8. Helps you figure out what you can borrow
Sometimes you'll need to borrow money by using a credit card or a loan to keep things ticking along. Knowing what you can afford to pay back each month from your budget can help make working out how much you can borrow much easier.
If you're a Cabot customer, why not use our Budget Planner to help you get on top of your finances?
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