Most Important Step to Budgeting?

31 Jan Most Important Step to Budgeting?

One of the most talked about personal finance topics is budgeting. So what is budgeting and why is it so important? A budget is a financial plan that takes income and expenses into account and provides estimates for how much you make and spend over a given period of time. It helps us plan our spending in advance and tracks how we are doing according to our plan within the specified period. However, it is lot easier to create the plan than it is to following through it. It takes great degree of discipline to adhere to a budget but I am not here to talk about that in this post. Rather I like to talk about what I think is the most important part of creating a budgeting. One can say this step is the prerequisite to budgeting, bookkeeping, or keeping track of your expenses and knowing how much money you are spending monthly.

By recording all of your expenses you can make better judgement and set goal that is realistic and achievable. Without it we have no way of knowing where to set budget numbers and that is a major hindrance to your financial quest. There are many tools out there to help you track where your money is going every month. I would recommend Mint.com based on personal experience based on following reasons.

1. It is FREE.
2. It aggregates all of your bank accounts or investment accounts information into one place and keeps it up-to-date.
3. You can set budget or goals and it will remind you how you are doing via text/email.
4. It provides other tools for managing your finances.
5. It has reports and graphs that can show you how you are doing in various financial areas.