In addition, setting up a budget also allows you to achieve your financial goals. Are you trying to pay off student loans? Has it been a dream of yours to make that last mortgage payment? These are important goals that, if met as early as possible, may save you a lot of money. Could you set the goal to pay off a house before retiring?

Retirement means that your monthly income may significantly drop, but if you have paid off your house before then, that could offset a major portion of the monthly loss that retirement may bring.

After having established your financial goals, now it is time to establish a spending plan: what changes to your spending you will make in order to achieve those goals.

One important thing to remember when starting a budget is that sacrifices should not be the focus of the budget. If you make the budget too rigid and hard to deal with, you're only setting yourself up for disappointment and quitting budgeting altogether.

Also, budgeting is not about reviewing where all of your money went after the month is over, but rather a plan of where you expect the money to go before the month has started.

Unexpected financial strains, such as medical and car repair bills are things that most people simply are not ready for. We can't just imagine that these things will never happen to us. It's important to set up a budget so that way these things won't be such a shock and emergency when they do finally happen.