by Hal Lillywhite

Created on: July 22, 2007

A budget improve your life? Like many I've thought of a budget as a straitjacket rather than as something to help me enjoy life. I was wrong.

Properly used, a budget is the best tool available to allow you to do what you want with the money you have. It may look attractive to just buy something without making sure it fits into the budget, but that "freedom" costs your real financial freedom. Usually quite soon. A lot of impulse spending will leave you without the means to do what you want.

Another big benefit of budgeting is marital harmony (if you are married). You really need to discuss how your money will be spent so each knows how much is available for what and can trust that it will be there. Having one spouse consistently expect to have money available for something, then finding that the other spent it on something else is a short-cut to the divorce court. Any divorce lawyer will tell you that money problems are the biggest factor in divorces.

Living without a budget is like driving blind and will lead to financial shipwreck.

One big benefit of a budget is that it allows you to look at what you have and where the money goes. Then you can decide if you are spending on your priorities or if it might be more fun to cut out one or two items and be able to do something different with that money. The purpose of a budget is to allow you to enjoy life more by picking where you spend your money.

Think of it this way. Once you've spent the money, it's gone. If something you want more comes along you may no longer have the freedom to buy it. Then that impulse moment purchase you made starts looking unattractive by comparison. Worse, if you spend too much you probably go into debt and risk losing *all* financial freedom. That financial freedom comes from the ability to decide how you want to spend your money. If it's already spent, you have no freedom.

Wise budgeting starts with a determination of how much disposable income you have. Note the word "disposable" here. That is not the number on your paycheck. We all have commitments we have to pay. There are taxes, food, housing, clothing and a myriad of other expenses just from living. Start with the number on the paycheck but then look at where it is going.

Most people have some expenses they cannot avoid and some that they can stop if they want to badly enough. Your budget should separate expenses into those two categories. You have to pay the rent or mortgage but that daily cup of fancy coffee or weekly trip to the fancy

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