The Advantages of Preparing a Monthly Cash Budget

Preparing a monthly cash budget will be a real eye opener if you’ve never taken the time to track your daily spending habits and investigate where and how you spend your money. Expense tracking, an essential component of budget preparation, is simply keeping a record of every time you spend money throughout the month--even those trips to the vending machine. You’ll be surprised how those afternoon snack breaks are adding up.

Maybe you’ve been thinking about getting a new car, buying your own home or you just want to get your credit cards paid off. Preparing a budget will help you establish long- and short-term goals where your finances are concerned. Identifying where you’re spending money unnecessarily enables you to figure where you can cut back to save extra money. For instance, in the process of preparing your budget you discover that those weekly dry cleaning bills are costing you around $100 a month. That’s $1,200 a year that you could save by using a home dry-cleaning product and ironing your own clothes.

Preparing a monthly cash budget is the first step toward getting out of debt. By limiting your monthly expenses and sticking to a cash budget, you’ll reduce your dependency on credit cards. As you become more accustomed to living within the parameters of your budget, you’ll be able to start getting those cards paid down until eventually you won’t have to rely on them unless it’s absolutely necessary.

You can never plan for the unexpected but you can prepare for it. You never know when you might encounter some unforeseen circumstance like job loss or medical problem and these are the types of situations that put people under serious financial strain. Preparing a budget will enable you to determine ways that you can start putting money away each month to ensure you have some cash to fall back on if the need arises.