Although budgeting may seem like a “drag,” drowning in debt is even more of a downer. It is important to keep track of where and how you are spending your money, and creating a monthly budget provides countless benefits. Deciphering your spending habits allows you to save money for unanticipated expenses. Here are several reasons why creating a budget is crucial to meeting your long-range financial objectives – for which you can never be too prepared.

Understand Your Spending Habits

At times, financial problems may remain unseen until a monthly budget exposes them. Interpreting your income and expenses on a monthly basis is the first step towards meeting your long-term financial goals. How often do you look at your overall spending?

By assessing your spending patterns, you will become more aware of where and when to hold back. You may be surprised to find that little indulgences, such as buying a daily coffee or going out to dinner, accumulate substantially. A budget can encourage you to conserve your money, and spend it more wisely.

Find Ways to Save

Faced with income constraints and competing demands for money, many people simply spend what they must on necessities, saving whatever happens to be left over. You need to have a cushion to be financially secure. While experts recommend saving 8 months’ salary to protect you from an unexpected emergency, most agree that paying off your credit cards takes precedence to avoid costly interest. By creating a budget, you will be able to control your money so that you contribute at least 10 percent of each paycheck to savings.

Begin Thinking More Cost-Effectively

Our own mind works against us when it comes to savings and budgeting. Psychologists have shown that we have, at best, a vague sense of what is in our account, and the wide availability of credit and debit cards have made it easier to spend ourselves into a hole.

If you lay out your budget, you will have what you spend, and where you spend it, at the forefront of your mind. Instead of aimlessly slapping down your credit card, you will carefully consider the long-term effects before moving forward with a purchase. Sacrificing short term pleasure for long term happiness is a critical step.

Plan for Changes in Your Life

Buying a new house, welcoming a new member to the family, and retiring are all drastic, yet probable life changes you will experience at some point. By creating a monthly budget, you are ensuring that you can afford these inevitable changes. Don’t allow one of life’s “speed bumps” to throw your financial situation in a tail-spin. Create a monthly budget and you will be better prepared for any transition.