The Impact of Budgeting on Savings Essay Example

My research question, “What impact does budgeting have on savings?” has a direct relationship to the savings element of financial literacy. This is because financial literacy is the set of skills and knowledge that allows someone to make smart financial decisions. Budgeting is so important in our world as it creates financial stability. By being able to follow an expense plan, it can leave you both out of debt and comfortable in your future! As someone with hopes of a future family and the goal of buying property, savings remains prominent. This is also why I hope my education at prestigious schools like McGill and UVic will help me get a well-paying job as a civil litigator. I have described how my earnings will fit into my overall budget with the goal of saving money. Living in a big (and expensive) city like Toronto requires immense savings to accomplish this goal. This allows me to have more leniency with my money, while still being able to save a lot. I chose this research as it will bring self-perception towards the topic. Investigating and educating about the impact that budgeting has on savings will teach me the diligence it takes to be able to achieve my end goal. Budgeting and savings are a large piece of financial literacy and this question provides useful guidance. I learned that budgeting is one of the greatest factors in savings! Also when budgeting, I am creating a structured financial plan to ensure I can make necessary purchases. Throughout this project, I have learned that the diligence performed in budgeting impacts how much I’m able to save. This is shown on my IGT as I showcase how my budgeting sacrifices, actually help me save a lot of money. You can see this on my “other monthly expenses”, and on my bar graph showing where and how much I saved. This graph shows a great deal of money spent on unnecessary activity/items that I can pleasantly live without. On the “other monthly expenses” section I have shown what I am sacrificing in order to save money. Seen on my IGT, as a civil litigator, I am saving $1175.15 per month. Not only is my budgeting keeping me out of debt, but it is allowing me to save about 28% of my net salary! I chose to save all of my money in a High-interest Savings Account. I chose this plan because it’s a free and reliable way to grow your money, even if insignificant. As well, as I need my money to stay put and grow, investing is a risk I am not in a financial spot to take. In the end, my IGT shows that in order to make significant savings, sacrifices are necessary. In order to budget for maximum savings, I had to look at needs versus wants. The first decision I made was a transportation sacrifice. I decided to swap paying the huge expense to own/rent a car to taking the TTC. Let’s be honest, the subway can be a pain! It can take extra time, you can be packed in against other people, and it can tend to be unreliable. It takes a lot more time and patience to dedicate yourself to the TTC versus just having a car. The reason I am making this subway though is it saves over $600 per month. As I look at how budgeting impacts savings, this budgeting choice creates a significant increase in my savings. Another thing I know that I want but do not need is a pet. Pets are SO important as they promote exercise, reduce stress, and ease loneliness (which can be a prominent feeling when living alone for the first time). However…they cost around $200 a month, which in my budget is something I am sadly not able to afford. One other thing I am sacrificing is entertainment (movies, sports games, concerts, etc.) As these activities can pile up and be so expensive, a part of my budget is to cut them out completely. The measures I took might be extreme but when I look at how budgeting impacts savings, having a strict budget has a huge positive impact on my savings, as now, in just 14 years I will be able to put a down payment on a house.