A written, monthly budget is a financial planning tool that allows you to plan how much you will spend or save each month. It also allows you to track your spending habits.
Though making a budget may not sound like the most exciting activity (and for some, it’s downright scary), it’s an important part of keeping your financial house in order. That’s because budgets rely on balance. If you spend less in one area, you can spend more in another, save that money for a large purchase, build a “rainy day” fund, increase your savings, or invest in building wealth.
A budget only works if you are honest about both your income and expenses. To make an effective budget, you must be willing to work with detailed and accurate information about your earning and spending habits.
Ultimately, the result of your new budget will show you where your money is coming from, how much is there, and where it all goes each month.