Opinion Article: 2024 Vol: 28 Issue: 6S
Omar Mansour, Hassan II University
Citation Information: Mansour, O., (2024). Budgeting: A guide to financial wellness. Academy of Accounting and Financial Studies Journal, 28(S6), 1-2.
Budgeting is a fundamental financial tool that empowers individuals and households to effectively manage their income and expenses. This article explores the importance of budgeting in achieving financial stability and outlines practical steps to create and maintain a budget. By setting financial goals, tracking spending habits, and prioritizing savings, individuals can gain control over their finances and make informed decisions. The article also discusses various budgeting methods, tools, and strategies to help readers optimize their financial health and achieve long-term financial well-being
Budgeting, Personal Finance, Financial Management, Income Management, Expense Tracking, Savings, Financial Goals, Budgeting Methods, Budgeting Tools, Financial Stability.
Budgeting is a cornerstone of sound financial management, enabling individuals to align their income with expenses and achieve financial goals effectively. This article explores the significance of budgeting in personal finance, offering practical insights and strategies to enhance financial wellness ( Brassington, 2018).
Budgeting plays a crucial role in achieving financial stability and security. It allows individuals to prioritize spending, manage debt, and save for future expenses or investments. By creating a budget, individuals gain clarity on their financial situation and can make informed decisions to improve their financial health over time ( Cohen, 2018).
Define short-term and long-term financial goals, such as saving for emergencies, paying off debt, or investing for retirement. Goals provide direction and motivation for budgeting efforts ( Drake et al, 2019).
Start by calculating total monthly income from all sources. Next, track and categorize expenses, including fixed costs (e.g., rent, utilities) and variable expenses (e.g., groceries, entertainment). Use tools like spreadsheets or budgeting apps for accuracy and convenience ( Collaborative, 2011).
Allocate income to cover essential expenses first, such as housing, utilities, and debt payments. Allocate a portion for savings and discretionary spending while ensuring expenses do not exceed income ( Drake et al, 2019).
There are several budgeting methods to suit different financial preferences and lifestyles: Allocates every dollar of income to specific categories, ensuring that income minus expenses equals zero ( Mamalis, 2017). Involves dividing cash into envelopes for different spending categories (e.g., groceries, entertainment) to limit overspending. Allocates 50% of income to needs, 30% to wants, and 20% to savings and debt repayment ( Edwards, 2021).
Monitor spending patterns and adjust the budget as needed to align with financial goals and changing circumstances ( Hamilton, 2024). Allocate funds for an emergency savings account to cover unexpected expenses without derailing the budget. Prioritize debt repayment within the budget to reduce interest costs and improve financial stability ( Grable, & Chatterjee, 2022 ).
Promotes responsible spending habits and discourages impulsive purchases. Facilitates progress towards financial goals, whether saving for a major purchase or planning for retirement ( Lent, 2023). Provides peace of mind by ensuring financial obligations are met and resources are managed effectively ( Law et al., 2019)
Budgeting is a proactive approach to financial management that empowers individuals to control their finances and achieve financial well-being. By adopting budgeting principles, setting clear goals, and adhering to structured financial planning, individuals can navigate financial challenges and build a solid foundation for future prosperity.
UBC Enrolment Services & Financial Wellness.
Indexed at, Google Scholar, Cross Ref
Cohen, S. L. (2018). Practitioner's Guide to Student Financial Literacy.
Collaborative, F. W. L (2011). Understanding and Promoting Student Financial Wellness.
Drake, D. S., O’Neil, T., & Hoffmire, J. S. (2019). Financial Wellness at Meredith Corporation. American Journal of Health Promotion, 33(1), 153-155.
Indexed at, Google Scholar, Cross Ref
Edwards, J. A. (2021). Interviewing for residency on a budget. The American Journal of Surgery, 222(6), 1180-1182.
Indexed at, Google Scholar, Cross Ref
Grable, J. E., & Chatterjee, S. (Eds.). (2022). De gruyter handbook of personal finance. Walter de Gruyter GmbH & Co KG.
Indexed at, Google Scholar, Cross Ref
Hamilton, H. (2024). The Impact of Financial Wellness on Student Success.
Law, R. H., House, A. C., & Duffany, T. A. (2019). Resources and tools for use in financial counseling. Financial counseling, 179-193.
Indexed at, Google Scholar, Cross Ref
Lent, A. V. (2023). Budgeting for Dummies. John Wiley & Sons.
Mamalis, L. A. (2017). Nitty gritty budgeting-coming up with the numbers.