by Kevin Osheer

Created on: January 03, 2009   Last Updated: February 26, 2010

Creating a budget is one of the first steps one can take towards becoming financially responsible. People who manage their money well will can increase the amount of money they put away into retirement or just savings by an enormous amount. Having a budget will tell you how much money is going out, so you can determine how much needs to be going out, and thus, how much can be saved.

Having a budget will allow you to pinpoint expenses. Not knowing where you money is going prevents you from evaluating whether or not the expense was absolutely necessary. If your budget is good it should tell you exactly what you're spending on every category, within a small approximation. Once you have pinpointed these expenses you can try and shave dollars off each expense and test it out during the month to see if that cut can be made permanent.

Having a budget will help you plan for retirement. Many people don't know where their money is going so at the end of the month they'll throw a couple thousand dollars into their retirement or saving accounts. Many people will opt out of investing any of their money. With a budget you can set aside a guaranteed amount of money per month that will end up in your retirement or savings account. This allows you to make very accurate estimations of how much money you will have at the end of your employment, thus allowing you to alter your money invested if you don't like the number you see.

Having a budget can help you avoid financial crisis. As stated above, it can help you avoid coming up short at retirement. But having a budget also allows you to set aside an amount of money for crisis. However small this number may be it can save you a lot of trouble. Even a few hundred a year could help. If you get in a Car accident but you just had to pay your child's tuition and have no money, you can draw out of your crisis account. It is very important to always have money, no matter how small the amount, in your budget to prevent you from having to borrow money in a crisis.

Having a budget can improve, not only your stress and money wasting, but your overall awareness about your own finances, and how to improve any mistakes you might be making in your spending. In these days, any money you can come by is a blessing, it'd be a shame if you were spending it wastefully by being unaware.

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