You've probably heard all about the importance of a budget from financial websites and experts. But the final call of whether it's beneficial to establish a budget is on you. It is wise to take time to explore both the advantages and disadvantages of setting up a budget before you start the process.
Maintenance --- Disadvantage
One downside of having a budget is that once you establish it you now have to maintain it on an ongoing basis. If you miss a month, week or even a day of maintaining your budget it could throw you off track of your entire plan. You may find yourself spending a lot of time monitoring your budget details, making updates, identifying issues and solving them. Be prepared for the time required to properly maintain a budget.
Lifestyle Change --- Disadvantage
Another disadvantage of a budget is that it requires you to make a lifestyle change. You have to make changes that could significantly disrupt your routine. For example, if your budget demands, you must start making your own coffee in the morning and packing it in a Thermos instead of visiting your favourite coffee shop for an expensive latte. You may also have to relinquish a few of your favourite cable channels to stay on track. In some cases the lifestyle change is temporary as you build up your savings accounts or seek better paying employment.
Monetary Control --- Advantage
When you establish a budget you gain more control over your finances compared to going without. Without a budget you don't have a full idea of how much money you have coming in and going out, so you don't know if you'll have a budget surplus or deficit at the end of each month. Knowing your exact budget figure at all times is empowering and allows you to make informed decisions about your money.
Goal Setting and Planning --- Advantage
Another advantage of a budget is that it allows you to set both personal and financial goals more efficiently. Once you have an accurate picture of your financial situation you can start to make realistic plans with your money. For instance, you can start contributing your extra money toward a CD (certificate of deposit) savings account. You might also decide, after reviewing your budget, that you should start seeking higher paid work. Having a clear plan helps motivate you to take positive actions.