Why You Should Budget

Khari Parker
A free video tutorial from Khari Parker
Real Estate | Personal Finance
4.5 instructor rating • 8 courses • 16,845 students

Learn more from the full course

*Global Course* Personal Finance Concepts for All Ages

Learn the Personal Finance concepts that will allow you to increase your income, budget, save, invest and a lot more!

02:31:34 of on-demand video • Updated May 2017

  • You'll learn to Use Your Passion and Talent to Earn Extra Income
  • You'll increase your income by learning how to "Get Money" through our "Need Money Now!" Lecture Series
  • You'll learn budgeting techniques that will reduce your monthly bills
  • You'll learn the knowledge needed to hold conversations relating to Personal Finance
  • You'll learn how to read and understand your Credit Report and Credit Score
  • You'll Improve Your Credit Score
  • You'll learn how to find Scholarships
  • You'll learn how to open an Investment Account and Purchase Stocks
  • You'll learn how to find a Real Estate Agent and Loan Broker to prepare you to Buy A Home
  • You'll learn how to manage Student Loan Payments/Repayment
  • You'll learn how to prepare for Retirement
English [Auto] That you've managed to get money it's time to begin to build a plan around how you will spend save and invest this money. This part of a financial plan is also known as a budget. A recent Gallup poll indicated that approximately 68 percent of Americans do not create detailed budgets. Now a legendary baseball player named Yogi Berra once said you've got to be very careful if you don't know where you're going because you might not get there. This statement holds very true when it comes to planning your financial future. It's a lot easier to achieve your financial goals if you plan than if you just wing it and hope that you end up in a good financial situation. When it comes to budgeting it's important that you create realistic goals that allow you to save and invest while also living a lifestyle is comfortable to you. These goals should be both short term and long term so your short term goals need to be specific. While your long term goals can be more vague. I like to think of this method as a short term budgeting with a long term line of sight. The idea is that over the long term things change and life happens. You may decide that you want to go back to school. You and your spouse may have a child or the unexpected illness of a family member may force you to allocate money away from one expense to another. Priorities change over the long term so it's important to remain flexible with our long term budget. I'm not going to paint a perfect picture to make it seem that budgeting is easy because it's not. However budgeting is very beneficial. By beginning the budget you'll gain more insight into the areas of your life where you can reduce spending as a result of reducing your spending. You're going to have a lot more money available to save and to invest. So budgeting may often mean that instead of going out to restaurants multiple times a week you may have to scale back to only once a week. This may mean you have to go during happy hour times so you can take advantage of happy hour food and drink specials. This may also mean that we plan a vacation to use discount travel services. Some services like Priceline Expedia hotels tonight and things like that. The idea here is that in order to increase your financial stability you're going to need to find opportunities to cut back on your lifestyle expenses. You'll be amazed once you begin to live this type of lifestyle it becomes amazingly simple and your close friends or family members they're going to admire you for it. I have a friend who scrutinizes every penny that he spends regardless of how small it may be from the outside his lifestyle appears to be the same as everyone else. He still vacations to the same places and eats at the same restaurants. However he uses sites such as Groupon and Living Social things like that to find good deals that allow him to enjoy the finer things in life. At a fraction of the cost. So these small cost savings have allowed him to grow a savings account tremendously. Now the key to budgeting is you need to pay yourself first. You do that by allocating money towards your savings and investment accounts. You should see yourself as a bill that must be paid on time every month. Budgeting properly will allow you to control bad spending habits. Often bad spending habits come from a lack of hope. Let's say for example a guy named Jack wants to buy a new TV. This TV will cost him $3500. Jack doesn't have any cash or savings. However he he's a shiny new credit card sitting on his kitchen table waiting to be yours. Jack knows that it will take him several months to save up and buy his TV but he feels he needs to have it now. After Jack makes this purchase he's hurt himself financially because the money he'll use to pay back the monthly principal interest payments on that credit card will make it much harder for him to save in the future. It would have been a far better idea if Jack had found other areas in his life to cut back on his expenses. Jack then could have used that excess cost savings to put towards saving for his new TV instead. Jack gave up hope for better financial days instead of delaying the purchase of his TV. He overextended his finances and made a bed purchasing decision by finding a way to buy the TV. We have all had our Jack moments the moment where you feel you must have something right away. But be careful because all it takes is a few of these types of moments to put you in a very bad negative financial situation. So the moral of the story here is that it's important to live within your financial means. It's only natural that we will have some doubts and feel we don't have enough money in the budget and that we aren't in a good position to save and invest. I cannot tell you how many times I've heard people say that they will begin the budget after they have their raise or after they get their income tax refund. But guess what it never happens. It usually amounts to people having a fear of not being able to buy what they want when they want it. You work hard you deserve to buy the things you want right. Well that's correct. In order to improve your finances you need to shift your thinking. This resistance to and fear of budgeting must be overcome and it's critical that we adjust our mindset so we can understand that budgeting properly will only help to improve our financial standpoint. Another important factor budgeting is that it serves to motivate us to gain more income. So we have more money a lot towards various expenses now through practical savings investing and budgeting. You're going to find in many of the persons you wish for. You can have a lot sooner than you've thought. Think of budgeting as a path to financial freedom. When your income is budgeted properly in time you're going to have ample play money that you can use towards whatever you may desire.