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Budgets – Why do you need one?

It is nearly the end of the financial year and it’s time to look at how your business has done for the year and talk to your accountant if there is any tax saving strategies you can adopt.

It is also the time to start to think about the new financial year and putting in place a budget. “ Why do I need a budget?” I hear you ask. There are many benefits to having a budget and this can also be relevant personally too (my husband says I need a budget for shoes!).

Budgets help you reach your goals. This could be a fantastic holiday to Disneyland or a business goal of paying off your overdraft or buying some new equipment. A budget helps you map out those goals and keep track of the progress and turn those dreams into reality.

Budgets help you stop spending money you don’t have. Well they can’t stop you spending money but they can help you live within your means. Before we had money in the forms of a plastic card, everyone received cash and their bills were paid in cash and savings stashed under the mattress and everyone knew what they had left at the end of the week. Today with the ease of credit cards people can overspend without realising they are doing it until the dreaded credit card bill arrives! If you create and stick to a budget you will be surprised as to how much money you can actually save.

Budgets help you prepare for emergencies. We all have those times where the washing machine decides to break or the computer stops working.  With sticking to a budget and putting away some funds for a rainy day, can makes these not so good situations less stressful.

Budgets help you see your spending habits. Creating a budget forces you to closely look at what and how much you are spending your money on. It can be surprising as to how much you think you are spending and how much you are actually spending.

Most accounting software allows you to enter in budgets and print reports showing what you budgeted and what you actually spent. This is a great tool for businesses and starts creating questions for business owners to think about like Why did we spend more than budgeted? Should the budget be increased? Is this a one off surprise expense? All of these questions wouldn’t be raised without a budget.

These are just a few benefits of having a budget. There are many more so time to start budgeting!!!

Ally Wadwell | Accountant | The Money Edge | Bundaberg

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