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Budgeting can be hard, but it’s worth the effort. How you manage your money can help you save for future goals and maintain a healthy amount of debt (or none at all). It could also help reduce how much stress is in your life by giving you a plan to pay off bills and being prepared for unexpected expenses. Read on to learn more about budgeting and how it could impact your overall wealth.

What is a Budget?

A budget is a guide that can help you track how much money you have coming in, how much you spend, and how much you might have leftover. It may seem tedious, but if you’re smart about how you spend your money, budgeting could help you save for big purchases as well as maintain a healthy debt-to-income ratio.

What is Wealth?

Wealth is how much money you have saved up (or how much you could potentially make off of an asset like stock investments). Wealth is important because it can help determine how financially stable someone really is. Building long-term wealth can be achieved by taking small steps today to improve how much money you have in the future—like budgeting!

How Can Budgeting Impact Your Overall Wealth?

Budgeting can have a positive impact on your overall wealth. Having a clear picture of where you are spending your money can help you make more informed decisions about things like: how to save, how much debt you need to pay off, and how much more investing (i.e., putting money into stocks or other investments for the long term) you could be doing. The sooner you make the choice to start budgeting, the sooner you can start making progress toward your financial goals.

Reduce Debt

Budgeting can be an important tool to help you resolve outstanding debts and gain financial freedom. Setting aside money each month to put toward reducing your debt can help you make a bigger (and quicker) impact on becoming debt-free. Paying down your debts quicker can also reduce how much you’re paying in interest and fees—potentially saving you hundreds or thousands over the life of your debt. However, if you feel like you have too much debt to handle on your own, a program like debt settlement might be a good option for you. Debt settlement companies specialize in negotiating with creditors to reduce what you’re required to pay back—meaning, you could become debt-free faster and for less than you owe.

Increase Savings

Increasing your savings is another good way to start improving your overall wealth. Try putting away a certain percentage of each paycheck into savings, even if it’s only $20 per month. We recommend putting your savings somewhere you won’t be tempted to spend it, such as in a dedicated savings account (separate from your checking).

Invest More

Saving money can also free you up to start investing. Investing takes money that you already have set aside and puts it to work for you in different ways, like through retirement savings or even by purchasing stocks. Investing can be a great way to increase your overall wealth and set you up for future success.

How to Start Budgeting

If you’re not sure where to start when it comes to budgeting, we’ve got you covered. Here are a couple of tips that can help you get started with setting up a budget.

Identify Expenses and Income

The first step is to figure out how much money you bring in each month and how much goes out. This can be difficult to do if you’re not sure where your money is going, but it’s a necessary first step before budgeting. Your bank and credit card statements are a great place to start when looking for information related to income and expenses.

Once you have a good idea of how much money is coming in and how much money is going out, it’s time to determine where you can cut back. Examine how many bills you pay each month and make sure they are necessary for your day-to-day life. Next, try to eliminate expenses by cutting out or cutting back in your budget to create room for savings. 

Create Budgeting Categories

Creating categories in your budget is an important step because it will help you keep track of how much money is being spent in each area. These areas can include things like entertainment, rent, utilities, groceries, and gas. If you are someone who has a lot of one-time expenses, then it can be helpful to create an area for these items as well.

Allocate Amounts to Each Category

Once you’ve built out your categories, you can go back and allocate how much money you want or need to spend in each area. If possible, it’s a good idea to keep your monthly expenses at under 50% of your paychecks. This can help create a buffer for savings and emergencies. 

Stick to Your Budget

The final and most important step in impacting your wealth through budgeting is to stick to it. This is sometimes easier said than done, BUT it’s essential for your financial success. It’s important to note that you might need to tweak your budget a few times before finding what works best for you.

How Can CreditAssociates Help?

If you’re struggling to budget or build your savings due to overwhelming debt payments, there’s help available. CreditAssociates specializes in working with creditors to settle debt for a fraction of what’s owed. We’ve helped thousands of people just like you become debt-free and we’re confident we could help you, too! Our certified debt consultants can walk you through our process and help you figure out how much you could save. Fill out our online form or give us a call at 1-800-983-6693, to learn more!

Common Questions About Budgeting: 

What are the benefits of budgeting?

Budgeting can help you achieve your financial goals. It can help keep spending in check, which can help prevent debt accumulation and give peace of mind that comes with knowing how much money is coming in versus how much goes out every month.

Is gas a need or a want?

Gas can be both a need and a want. Gas for getting to your job is a need, while gas used for taking a road trip could be considered a want. Whether it’s a need or a want, we recommend adding a category in your budget to help account for fuel costs.

Why do I need a budget?

People need a budget because it can help them stay on track with their financial goals. If you don’t know how much money is coming in versus how much goes out every month, how can you possibly hope to pay your bills or save up any money? 

What is the best way to grow my wealth?

Growing your wealth can be done in many ways. One popular way to grow your wealth is to find ways to invest it. This can be done through investing in the stock market or investing in real estate. However, if you’re looking to grow your wealth, an important first step is to establish a budget with goals.