Money Talks, So Should You

Q&A: Why is it important to have a budget?

Garry Good
by Garry Good, The Garrett Network

Imagine a car with no fuel gauge. What would driving be like? A constant state of uncertainty and stress. You could fill up at the pump more frequently to gain "peace of mind". Still, running out of gas occasionally would be inevitable. Although we take it for granted, the gas gauge is a pretty useful tool that can reduce anxiety and simplify our life.

A budget, like the gas gauge, is a valuable information tool that provides peace of mind and more control. That's not to say creating a budget is easy. Life is unpredictable, unexpected expenses occur, and things change.

READ: Is it best to set a yearly or monthly budget?

However, this is also why a budget is most important, and worth the effort. The real power of budgeting comes into play when forced to deal with change. When life throws you a financial curve, a review of your budget helps to analyze the situation, identify possible solutions, and modify your plan. Of course a good budget includes some allowance for the unpredictable - which allows you to take most bumps in the road without breaking stride.

The process of budgeting is as important as the budget itself. When you develop and track a budget, you are forced to set priorities, better understand your financial limitations, and know where your money actually goes. This can be very enlightening to a couple -  a great way to identify and discuss differences in financial priorities and overall attitudes about money.

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Garry Good, CFP® is founder of Good Financial Advisors, a fee-only financial planning firm located in Bloomington-Normal, IL. He specializes in retirement planning, Garry helps clients navigate the complex transition from asset accumulation to reliable retirement income stream.