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4 Reasons Why Budgeting is the Key to Financial Freedom

By Priya

February 24, 2020

Budgets aren’t very popular. They tend to have a bad reputation for restricting your life and being boring. All you need to do is whisper the word “budget” and you can probably hear people grumbling all over town! On the contrary, I LOVE my budget. And, no, it’s not because I’m an accountant but I’m sure that helps. Although, we get a bad reputation for being boring too! A budget is nothing more than a plan for your money to help you achieve your goal of financial freedom.

The truth about budgets is that they aren’t about being boring or restrictive. They’re about being prepared. A strong budget you can understand and stick to could be the difference between success and failure in your quest to achieve financial freedom.

So, why not equip yourself with the best tools to help you get there? Yes, you’ll need to put in some time and energy. But your budget is essentially an investment in your financially free future. There are so many benefits to budgeting that will change your life. I guarantee you that it will be worth it.

The reason why I budget

I’ve been budgeting in some form or another for as long as I can remember. I was even tracking my expenses before the age of 10 – but that’s a story for another day. Today, I’m sharing why my budget is so important to me. This should (hopefully) help you see why you need a budget in order to achieve financial freedom.

I’m in love with budgeting, and I’m proud to admit it, no matter how boring people think I am. Why? Because my budget is the plan that’s going to help me achieve financial freedom. It’s going to allow me to actually live my life instead of just existing to pay the bills. It’ll give me the luxury of not having to constantly worry about money.

I create a zero-based budget for each paycheque I receive. Whenever I get paid, I create a plan for every single one of those dollars. My budget gives me clarity and direction. It allows me to make intentional decisions about my money to achieve my goals.

If you’re avoiding budgeting because you think it’s boring and difficult, then you’re putting yourself at a disadvantage and your goals of financial freedom on the shelf. Here are 7 must-have items that make budgeting fun and easy.

Why budgeting is the key to financial freedom

Build awareness and highlight problems

When you begin tracking your spending, you begin to see where your money is really being spent. If you’re wondering whether you can make it to next payday and asking yourself “where did my money go?”, then you need a budget.

Tracking your spending will answer that question for you. You’ll be able to see where your money is going and why it’s going there. Your budget will clearly show you the financial consequences of your decisions. Knowing where your money goes will help you identify any problem areas you have.

It was only after tracking my expenses that I realised I’m not a particularly frugal person. That’s especially the case when I’m depressed or anxious or I’ve had a bad day. I get spendy and start accumulating ‘stuff’ and extra kilos very quickly.

It’s a huge problem area for me and a personal roadblock to achieving lasting financial freedom. I’m still working on improving this problem area but it’s always easier said than done. But I wouldn’t have even known it was a problem if I wasn’t aware of the financial consequences of my choices.

Plan ahead for larger expenses

If you’re always wondering how you’re going to afford things, and where you’re going to find the money then you need a budget. A budget will help you figure out how to afford the things you can’t afford. That in itself makes a budget an incredibly powerful tool.

When you have a robust budgeting system, you’re able to plan ahead for larger bills, expenses and events that come up. You’ll also be able to plan ahead for those ‘expensive’ moments like Christmas, travelling and weddings. It allows you to see how much you need to set aside from each paycheque to cover these costs without having to rely on debt.

I create a separate budget for travelling, holidays and event like Christmas. This allows me to see how much I’ll realistically spend far enough in advance to save up for the occasion.

Planning ahead will also help you prepare yourself financially for emergencies like the car breaking down or losing your job. It will involve building up and maintaining an emergency fund to protect yourself and your finances. Your emergency fund is crucial to achieving lasting financial freedom.

Without it, every emergency, no matter how large or small, will erode your wealth. My emergency fund is my lifeline. The security of knowing I can handle emergencies without having to turn to debt is priceless.

Create a plan to achieve lasting financial freedom

Saying that you want financial freedom will never be enough. You need a plan to actually make progress on that goal if you really want to get there. The good news? That’s exactly what a budget is. You’re essentially spending money on paper before you spend it in real life.

Once you’ve paid your bills and taken care of your essential living expenses, you get to decide what to do with the rest of your after-tax income. You might want to start building up your emergency fund or paying off debt. There might be a holiday on the horizon you want to save up for, or you might decide to invest it and grow your wealth.

I set aside money to be saved from every single paycheque I receive. That money is dedicated to helping me reach my goals, instead of being spent on things that don’t really matter to me.

Read more: How a Normal Couple Paid Off Over $200,000 Of Debt

Make better financial decisions

When you’re aware of your problem areas and you have a plan to reach your financial goals, you begin to make better financial decisions. It becomes easier to identify and say no to things that don’t align with your goals.

For example, it’s easy to spend $100 a week buying your lunch at work when you don’t have a budget because you had no other plan for that money. But when you have a plan to reach financial freedom, it makes you think twice about spending that money on lunches, when you could also use it to pay down your credit card debt.

I mentioned before that my budget is helping me overcome my emotional overspending problems. At the same time, my budget is also helping me make more strategic decisions about how I use my money with my goals in mind.

Because I have a budget in place, I know that money spent on retail therapy is money that isn’t going towards my goals. When you’re aware that what you have is limited, you’re forced to make more strategic and intentional decisions.


Your journey towards lasting financial freedom must be built on a solid foundation, and that foundation is a budget. It’s the key to creating financial freedom because it allows you to plan for every dollar and give each dollar a purpose in achieving your goal. Budgets also make us aware of our problem areas and teach us to make better financial decisions while working towards our goals.

Priya

About the author

Hi, I’m Priya! I’m a Chartered Accountant and the creator of Paper Money Co. Life is too short to be constantly worried about money. I want my life to be more than just going to work to pay the bills. Join me as I strive to live a life I love on a budget I can afford (and without going broke)! Are you ready?

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