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The budget is the most misunderstood financial tool, and there are 3 reasons you should embrace it


A budget can help you reach financial independence.

Most people think of a budget as something that restricts their life and fun.
But a CPA says the opposite is true: A budget can help you achieve your biggest goals.
It helps you save for vacations, retirement, and unexpected expenses that could put you in debt.
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Many of us cringe at the word “budget.” We think of it as a tool that restricts us and stops us from enjoying our lives.

But, according to Erik Marberger, a CPA at PricewaterhouseCoopers, a budget can actually do the opposite: it can liberate you.

“A budget is one of the most sure-fire ways to help you achieve financial independence,” Marberger says. “Budgeting will allow you to save money, avoid overspending, and stretch every dollar. Your budget shouldn’t restrict you to eating ramen every night and canceling your Netflix subscription.”

Marberger shared a few good reasons everyone should create – and stick to – a budget.

1. What gets measured gets managed

If you’ve ever worked in finance, you’ve probably heard this famous quote, often attributed (incorrectly) to Peter Drucker. Drucker might not have said these words, but their meaning is clear: Examining an activity, like your spending habits, allows you to manage and improve upon it.

A budget is important because it allows you to have a clear view of your spending, i.e. to measure it. Once you build a budget and start tracking your purchases, you can have some insight into what you’re spending most of your money on and where you can cut back.

Maybe you didn’t realize you spend hundreds of dollars a month on subscription purchases. You may even find out you’ve been spending money on certain recurring items that you don’t use anymore. Just creating a budget allows you to comb through your spending with a fine-tooth comb and start making adjustments. When you find areas to cut back, you can direct that cash to other goals, like saving and investing.

2. You can save for the future

“Almost all of us work for money. But the truly successful people get money to work for them,” Marberger says. By creating a budget, you can allocate a portion of your income to work for you.

By setting aside money every paycheck, you can use that money towards an IRA, 401(k), or even starting a business.

The money you set aside for the future doesn’t always have to be invested, either. With a budget, you can set aside money for planned purchases like a vacation, wedding, or buying a home.

3. It helps you prepare for the unexpected

According to Bankrate, just 39% of Americans can afford a $1,000 unexpected expense. With a budget, you can set aside money every month towards a rainy-day fund to …read more

Source:: Business Insider

      

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