If you've heard it once, you've heard it a thousand times: BUDGET YOUR MONEY! Financial experts and money advisors have been shouting this mantra from the mountaintops for countless years.

By now, you're probably sick of hearing the "b" word. Too bad. This is just one of those financial lessons that cannot be preached enough - especially in this tough economy, where job losses are rampant, home values are in the toilet and wallets are tight, budgeting is more important than ever. If you and your family want financial security, following a budget is the only answer. (For more on budgeting, check out 3 Alternative Budget Styles: Which One's For You? and 6 Months To A Better Budget.)

Still not convinced? Here are six darn good reasons why everyone should create and stick to a budget:

  1. It helps you keep your eye on the prize.
    A budget helps you figure out your long-term goals and work towards them. If you just drift aimlessly through life and toss your money at every pretty, shiny object that happens to catch your eye, how will you ever save up enough money to buy a car, take that trip to Aruba or put a down payment on a house?

    A budget forces you to map out your goals, save your money, keep track of your progress and make your dreams a reality. So, it may stink when you realize that brand new shoot 'em up Xbox game or the gorgeous cashmere sweater in the store window doesn't fit into your budget. But when you remind yourself that you're saving up for a new house or graduate school, it will be much easier to turn around and walk out of the store empty-handed.

  2. It ensures you don't spend money you don't have.
    Far too many consumers spend money they don't have, and we can owe it all to credit cards. As a matter of fact, 13 million of Britain's credit card holders do not pay off their debt in full each month. These debtors carry an average debt of around £5,000. On top of that, there are more credit cards in the U.K. than there are people, according to APACS. At the end of 2007, there were 73 million credit and charge cards in the U.K. compared with around 60 million people in the country.

    Before the age of plastic, people knew if they were living within their means. At the end of the month, if they had enough money left to pay the bills and sock some away in savings, they were on track. These days, people who overuse and abuse credit cards don't always realize they're overspending until they're drowning in debt.

    However, if you create and stick to a budget, you'll never find yourself in this precarious position. You'll know exactly how much money you earn, how much you can afford to spend each month and how much you need to save. Sure, crunching numbers and keeping track of a budget isn't nearly as much fun as going on a shameless shopping spree with your credit card. But look at it this way: when your spend-happy friends are making an appointment with a debt counselor this time next year, you'll be jetting off for that Hawaiian adventure you've been saving for, or better yet, moving into your new home.

  3. It leads to a happy retirement.
    Let's say you spend your money responsibly, follow your budget to a "T" and never carry credit card debt. Good for you! But aren't you forgetting something? As important as it is to spend your money wisely today, it's also critical to save for your future.

    A budget can help you do just that. It's important to build retirement contributions into your budget. The State pension may not provide you with enough income to give you the kind of fabulous retirement lifestyle you desire. That's why you should find out whether your employer offers a pension scheme. If you are already a member of your employer's scheme, you might be able to make additional contributions to boost your pension. You should also consider saving in a personal pension scheme or stakeholder pension, which are widely available from financial firms and insurance companies.

    If you set aside a portion of your earnings each month to donate to a pension scheme, you'll eventually build up a nice, fat nest egg. Although you may have to sacrifice a little now, it will be well worth it down the road. After all, would you rather spend your retirement golfing and going on tropical holidays or working as a supermarket store greeter to make ends meet? Exactly.

  4. It helps you prepare for emergencies.
    Life is filled with unexpected "surprises," some better than others. When you get laid off, become sick or injured, go through a divorce or have a death in the family, it can lead to some serious financial turmoil. Of course, it seems like these emergencies always arise at the worst possible time when you're already strapped for cash. This is exactly why everyone needs an emergency fund.

    Your budget should include an emergency fund that consists of at least three to six months worth of living expenses. This extra money will ensure that you don't spiral into the depths of debt after a life crisis. Of course, it will take time to save up three to six months' worth of living expenses. Don't try to dump the majority of your paycheck into your emergency fund right away. Build it into your budget, set realistic goals and start small. Even if you put just £25-50 aside each week, your emergency fund will slowly build up.

  5. It sheds light on bad spending habits.
    Building a budget forces you to take a close look at your spending habits. You may notice that you're spending money on things you don't need. Do you honestly watch all 500 channels on your costly cable plan? Do you really need 60 pairs of black high heels? Budgeting allows you to rethink your spending habits and re-focus your financial goals.

  6. It's better than counting sheep.
    Following a budget will also help you catch more shut eye. How many nights have you tossed and turned worrying about how you were going to pay the bills? People who lose sleep over financial issues are allowing their money to control them. Take control. It's as easy as building and sticking to a budget. When you budget your money wisely, you'll never lose sleep over financial issues again.

Of course, this is just the tip of the iceberg. There are countless other advantages to following a budget. So what are you waiting for? Time to get to budgeting! (For more on getting started with a budget, read Top 5 Budgeting Questions Answered.)

Related Articles
  1. Budgeting

    How to Cost Effectively Spend on Baby Clothes

    Don't let your baby's wardrobe derail your budget. These top tips help you to save money and spend wisely on baby clothes.
  2. Personal Finance

    College Students are Failing Financial Literacy

    Financial trends among college students are a cause for concern, prompting a renewed emphasis on financial literacy.
  3. Economics

    These Will Be the World's Top Economies in 2020

    Discover the current economic forces that are anticipated to significantly shift the landscape of the world's most powerful economies over the next decade.
  4. Budgeting

    6 Cost-Effective Tips for Raising Your First Child

    The excitement of welcoming your first child to your family shouldn't prevent you from making good cost-effective decisions.
  5. Budgeting

    5 Ways to Date on a Budget

    Dating on a budget doesn't have to be boring. Try these 5 tips to find the best dates on a budget.
  6. Budgeting

    7 Kids Items You Should Never Buy Used

    Buying secondhand items is a great way to save money, but these seven kids items should not be bought used.
  7. Savings

    6 Millionaire Traits That You Can Adopt

    Millionaires have more in common than just their bank accounts. They share certain qualities that help them make it to the top.
  8. Investing

    10 New Apps That Help Budget For Expensive Cities

    From platforms for saving money to those that account for side jobs, mobile apps are changing spending habits and income generation in urban areas.
  9. Budgeting

    How Cooking At Home Can Save You Real Dough

    Cooking at home saves time and money but most importantly, it could even help lower future health costs.
  10. Home & Auto

    Why Housing Costs Shouldn't Exceed 30% of Your Budget

    Financial experts will argue that there’s no problem with allocating 50% of your net income to housing, but that barely leaves enough money for living comfortably. Reducing housing expenses to ...
  1. Can mutual funds outperform savings accounts?

    A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
  2. Can I use my IRA savings to start my own savings?

    While there is no legal reason why you cannot withdraw funds from your IRA to start a traditional savings account, it is ... Read Full Answer >>
  3. How soon should I start saving for retirement?

    The best answer to the question, "How soon should I start saving for retirement?", is probably, "yesterday," and the second ... Read Full Answer >>
  4. Can I use my 401(k) as a collateral for a loan?

    Although federal Internal Revenue Service, or IRS, regulations prohibit using a 401(k) account as collateral for a loan, ... Read Full Answer >>
  5. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  6. What is the range of deductibles offered with various health insurance plans?

    A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!