How To Use A Budget To Increase Your Wealth

Budgeting personal finances can seem like a source of great distress or annoyance, most especially if you are struggling financially.

Strange enough, this often under-looked exercise can be the starting point to reorganizing your finances after you have made the decision to improve your financial life.

The process of creating a budget does not have to be complicated. The trouble for most people begins when they attempt to use complicated software without an understanding of the fundamentals of budgeting.

The result is more time wasted trying to figuring out how to use software than actually getting the best out of the budgeting process.

Budgeting your income can actually help you put your financial goals into perspective because it helps you get organized, for as long as you keep it simple.

In this article we will cover 3 tips on how to use a budget to increase your wealth.

1.  Budgeting promotes financial discipline

To increase your wealth in a sustainable way, you need to have the financial discipline that allows you to allocate your spending between consumption and investment.

If you spend most of your money on consumer goods, you will not have much left to save and invest.

On the other hand if you save and invest most of your money, you will continue to earn more money from what you have put aside.

A deliberate effort in deciding how you allocate money between the two can have a profound impact on your wealth.

How you strike that delicate balance depends on your personal financial goals.

Ideally, the first and most important investment you should make relates to your financial education.  How much you invest in yourself directly affects how wealthy you will become.

The financial discipline that comes from budgeting allows you to improve your expenditure pattern which in turn creates the money consciousness you need to increase your wealth.

2.  Decision-making for day-to-day expenditure

A personal or family budget helps simplify decisions on how to spend your money each and every day. This is especially true when you receive unexpected income.

Once you get used to spending money according to a structured plan, you will slowly begin to gain control over your finances and the temptation to spend money as quickly as it comes will not be so great.

You will also realize that you are not under any pressure to buy things you do not need.

It is important to note that when you decide not to buy an item that was not budgeted for, it does not mean you can’t afford it.

It simply means that you can defer that expenditure to a time when you have actually put money aside for that specific item.

Governments and successful companies budget their expenditure to ensure that they put their funds to optimum use. There is no reason why you should not do the same.

3.  Reducing and eliminating contempt for small amounts of money

Budgeting helps you create an awareness of how much money you have at your disposal. This not only helps you to establish spending limits, but also gives you an acute sense of the value of money.

Almost all of us have what I like to call a ‘waste threshold’.

By this I mean a particular subconscious contempt for an amount of money which is too little to be taken seriously to the extent that you feel it does not really count.

To some people, anything less that $10 dollars is not important, while to others, coins don’t count. Any amount considered too little to be of importance is subconsciously frittered away.

Ironically, most wealthy people have a very low ‘waste threshold’ because they understand that every penny counts. You can easily create this awareness once personal budgeting becomes second nature to you.

One reason why most people do not budget their income is because they believe it is too basic and they can do without it, then they wonder why they continue to struggle financially.

Others simply do not know how to create a budget. Planning and forecasting your finances can be simplified once you master the budgeting process.