You have probably heard that you should develop a monthly spending plan or budget for your family. But you may not know why this is so important, or what the benefits are. Here are some of the benefits of creating a monthly spending plan for your family.
Guard against Financial Ruin and Bankruptcy
There are no guarantees that hard financial times will not hit, and there’s no way to guarantee that you won’t have some financial challenges. Disaster beyond your control can strike no matter how prepared you are. That said, there’s no use increasing the risk by not having a family spending plan. Having a plan helps guard against financial ruin by keeping you aware of the numbers – you know what you have, what you can spend, and where you need to cut back.
Build Good Credit
When you make a spending plan, you will be spending where it counts – paying off debt or keeping it at bay. Either way, you’re building good credit by getting your bills paid (and hopefully paid off) on time. Having good credit can make the difference between financial success and failure – if you want to buy a house, or need to take out a loan for an emergency, having good credit can make all the difference. Poor credit means you just won’t have as many options when you need them.
Peace of Mind
A family spending plan helps create peace of mind. You know what you have to spend, and what you have in the bank. With a spending plan in place, you will be less likely to wonder from month to month if you’ll have enough in the bank or if you’ve maxed out this or that credit card. And you will also have a savings plan worked out, which goes a long way toward establishing peace of mind.
Avoiding debt is a major key in financial success and stability. It’s one of those things that everyone knows but few really follow. Debt because of need is sometimes unavoidable (a major illness that insurance doesn’t cover, for instance, or a disaster that you could not foresee or control); but you can choose not to get into voluntary debt, and that’s what a monthly spending plan can help you with. It can also help you avoid emergency debt, providing a way for you to prepare for emergencies.
Making Your Money Work for You
Developing a workable spending plan means you are getting the most out of your money. Such a plan can help you spend and save more effectively, reducing waste where you may not have realized there was any waste. You may find your “need” for credit is greatly reduced when you are using your money to its best effectiveness.