In South Africa, over 80% of people over 18 years old borrow money every single year. That shows just how hard it is to live sustainably within your means for most of the population. Without a smart spending plan, you could end up in a dangerous cycle of debt.
If you end up with bad credit at a young age, it could adversely affect your future. You could have trouble buying a car, renting a car, or even setting up a good mobile phone contract. Walking around with a bad credit score hanging over your head is no way to live your life, especially if you’re a young person.
To avoid any trouble with your credit, put together a smart spending plan. Here are 8 more reasons you need to live on a budget so you never need to dig out of a credit hole.
1. You Can Have Financial Direction
While most people would like to make a lot of money, most people don’t know what they would do if they got the money. That’s one of the reasons so many people end up in a bad credit situation later in life. They get access to credit or even get a high-paying job, but then they don’t realize the costs of maintaining a certain lifestyle.
Giving yourself some financial direction with a spending plan allows you to spend with a purpose. Each major expense should have meaning and every day can be one more step in the direction of a positive saving habit.
You’ll also need to think about retirement. Putting money aside now, little by little, will help you be able to retire at a later date. Even young adults should be thinking about how to save for the future.
2. You Can Get A Sense Of Your Timeline
One major component of your spending plan is a timeline. By scheduling the amount of money you hope to have by a certain point in time, you can see how realistic your goals are. Many people would love to retire at 50, but if you’re only putting a small amount of money away at a time, you won’t meet your goal on time.
By assessing how much you have to spend now, you can also see how much you could be saving. Rather than recklessly going out each day with the potential of coming back with an arm full of shopping bags, you can go out with a set budget. You’ll return home every day knowing you’re one day closer to your goals.
3. Find Out What Mistakes You’re Making Now
There could be a huge leak in your current budget. You could be spending money for an unnecessary expense you may have forgotten about. Watch out for automatic payments that could come back to haunt you.
Common mistakes include a subscription to a service that you no longer use. Whether it’s an online streaming music service or a subscription to a magazine you no longer read, you should assess each of these costs.
Another mistake is daily spending for things you don’t need. If you’ve got a smoking habit, perhaps it’s time to quit for the sake of your health and your wallet. If you buy lunch every day at work, perhaps you could be bringing your own and saving yourself more money every week.
4. Watch Your Progress On A Monthly Basis
Since you’ve worked a schedule into your spending plan, you can see your money grow on a regular basis. Each day that you return home, without any shopping bags of things you don’t need, you can check your bank account and smile. You’ll be pleased to see that you’re saving money to reach your goals.
If you rent your current home, you can watch as the number climbs to that goal where you can finally buy your own home. The feeling of seeing that number go up might be exciting and even overwhelming. Reaching your goals is an exciting feeling.
Even if you’re just watching your vacation fund go up, that can be exciting as well. If you have different accounts for different purposes, you can measure your progress in different increments. One can reward you while you work on your big overall goal.
5. You Can Be More Confident
Once you’ve reached a certain level of savings, your spending plan can allow you a certain amount of flexibility. If you’re looking to make a job change, your spending plan can allow you those extra few weeks without employment to focus on your job hunt.
Being in control of your finances gives you power over your present and your future. The amount of discipline that has allowed you to save so much will influence how you make a career shift.
You might feel confident in other aspects of your life. If not having enough money has been a difficulty in personal or romantic relationships, you won’t have to worry about that with the right spending plan. You can make enough room for fun while not losing focus on your future.
There’s confidence to be found in living more comfortably. When you make room in your spending plan to afford the creature comforts that you need to be happy, you will walk with happiness and dignity. You deserve to enjoy dessert, a new car when you need one, or even just a new piece of living room furniture when the old one has worn out.
A Spending Plan Enriches Your Life
Without the direction that a budget plan provides, you could be living without as much purpose. Working at your job, day in and day out can seem monotonous without goals that make it worthwhile. You might even find more job satisfaction once you have your budgeting plan in order.
If you want to avoid the most common budgeting mistakes, check out our guide to the 10 most common ones.