Why Budgeting Matters: A Guide to Better Financial Management

Why Budgeting Matters: A Guide to Better Financial Management

By Lars Guo 

Published: April 17, 2024

Opening message: Hi Folks! I hope you all have been enjoying the blog posts! Today's blog is about budgeting. It is going to cover why budget, tips, whether I budget or not, why, the importance of budgeting, how to budget, and who should budget. There will be a closing message as always. As a disclaimer, I am not a financial advisor. Like the one with the certificate of deposits, it is just my take on it and information that you can use. It is not meant to be an attack on you or anything. 

Why budget?: Budgeting gives direction to how much you need to allocate towards certain expenses. It is important to divide your paycheck based on your expenses and how much you could afford to splurge, need for living expenses, and saving in general. This also includes retirement. 

Tips on Budgeting: Figure out your expenses and figure out your net profit. Automate your savings. Make sure you set aside money for your emergency fund and retirement. You never know what will come up. Always set a little bit of money for fun. Otherwise the desire to splurge is going to be higher. Just make sure it doesn't bleed to your living expenses. Don't forget to record your expenses either via an app or your spreadsheet. Make sure you have categories. Personally what I do is categorize for house, savings, vacation, fun, retirement, and living expenses. Understand what the difference is between a want and a need. Dining out is a want. A need is a house/condo, utilities, and healthy food. Be realistic. 

Do I budget? And why?: I do because it is important to think as if you are living on your own and not bleed into your budget set for living expenses. I budget because it will be important for me in the future. I might as well get used to it.

The Importance of budgeting: It is important to set aside money for certain categories. Staying organized helps lead to successful lives. It won't be perfect but don't forget it is better than nothing. Organization helps account for unforeseen events.

How to budget?: Figure out what your expenses are which are necessities, what percent you can save, and don't forget to set aside a small portion for fun money. Right now, I have been saving 60 percent of my income for living expenses. I put aside 20 percent for savings. I put 20 percent for fun. Although, the portions are going to change once I get a career job. It will be more like saving a bigger portion to save for retirement and more like 10 percent for fun/vacation while house and savings will get 30 percent. Saving for unexpected situations is important. Keep in mind this is all after tax dollars with the exception of the retirement cut to my paycheck. It used to be a 50-30-20 rule until I realized that is less realistic. I currently don't pay rent but I do put aside that money as if I were and put them into CDs and don't spend it. It is the rule that you get what you get and you don't get upset.

Who should budget?: Everyone who has an income should absolutely budget. It doesn't matter how big your income is. It is important to develop these habits early before you have major expenses. Yes, even you teenagers should get used to budgeting. It is a life skill that all people making money should know. You do not even need a corporate job but even times like babysitting, pet sitting, etc all count towards the situation as well. 

Closing message: I hope you enjoyed this blog post about budgeting. I hope the information is helpful. I am looking forward to all of you reading the next blog post. The next post is going to be about ramen and dipping noodles. 

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