Are Budgets REALLY that bad?
Many people associate the word "budget" with the idea of restrictions. They don't want to be on a budget because they don't want to go without *blank*. A budget would keep them from having fun. I'd like to debunk that myth.
There was a time when I did not bother with a budget. I knew rent for my tiny one-bedroom bachelor pad was $400 per month, it cost $30 every two weeks to fill the tank of my little 2007 Ford Focus hatchback, and my dog's food was $40 every month. As long as I had that covered, I just needed to keep my belly full and my bank account positive.
That choice had already set me up for moderate success; I wasn't moving forward but, at least I wasn't moving backward.
Eventually, I realized I had to get more serious about my finances. I had been dating a girl for a while and was pretty sure I was going to marry her. Then she dumped me! Can you believe that? No hard feelings though, we got back together and I decided I needed to marry her before she realized she was way out of my league! I had already asked her Dad for his blessing and had received it. Her parents had graciously offered to pay for the wedding, so I was left with the ring and the honeymoon.
I wrote down all my expenses on paper including the little things like Netflix, toiletries, etc. I was surprised to find out I had quite a bit left! I hadn't realized how much I had been wasting on little, insignificant things. It's said that when you get on a budget, you'll feel like you got a raise, and I did. I was able to save for the ring in no time.
I have found that many people do as I did when I was younger. They try to keep their bank account above zero but do not write anything down. The problem with this is that it leaves very little room for the unknown. If you live paycheck to paycheck as 78% of working Americans do, always flirting with a bounced check, what will happen when an emergency comes? Did you know that 66% of Americans interviewed in a 2017 CareerBuilder study said that they would struggle to cover a $1,000 emergency? I'm relatively young and even I have faced a few of those and a few that were much more costly.
When you write out your budget monthly (a unique budget every month) it can actually give you quite a bit of freedom. By writing out our budget, my wife and I decide what is important and what is not. We get our basics covered and can plan out larger expenses like vacations, vehicle maintenance, pet adoptions (see? Its not all boring!), etc. Because we plan at the beginning of the month, we don't worry at all about money during the month.
Another benefit to budgeting is that you can plan for the unexpected. My wife and I have an emergency fund in our budget. Every month we add a little to it until it reaches a certain amount. Then we let it sit, untouched, and liquid, so we can get to it right away. Several months ago, we had the unfortunate need to use that emergency fund. Someone on my wife's side of the family had passed away. We had to call into work, get on a last minute flight to the other side of the country, stay a few days to be with her family and then return home. A couple weeks later, we were back for a memorial service. Because we were gone two separate times and because we were gone for so long, our employers bereavement policy did not cover us completely. Thankfully, because we had budgeted and planned for the unexpected, we were able to cover several days without pay, and 4 total round trip tickets across the country without having to stress. We were able to be with our family mentally, spiritually, and emotionally because we were not worried about how we were going to make ends meet. From my personal experience, I highly recommend that everyone writes a monthly zero-based budget. Every dollar should have a name.
Some will say "I don't make enough to need a budget" or "I make too much to need a budget" or even "I can't budget, I have an irregular income." Listen, I've been hourly, I've been 100% commission, and I've been hourly against commission. I challenge you, give yourselves three month on a written budget. Follow it for three months. If you need to make adjustments, make adjustments, but only if needed. Don't break your budget in the middle of the month because of a new Call of Duty release. Trust me, you can make it to the end of the month without it.
I personally use EveryDollar.com because it is easy to use and it doesn't try to sell me stuff constantly like mint.com. No, I am not affiliated with them and I don't get anything if you use them. EveryDollar.com is free but has a paid option if you want to link your account. I use the linked feature now but I am glad I used the free version for several months. It forced me to keep track of my spending. It's hard to ignore stupidity when you have to enter every transaction at the end of the day! If all else fails, a yellow pad works too!
Maybe budgeting should be an addition to your New Year's Resolution! If you need help learning how to budget, if you are in a financial crisis, or if you just want to take your finances to the next level, let me know! We can find a time to chat. You can book a session by clicking on the appropriate link on the right. In the meantime, head over to our Resources page and take a look at the Quick Start Budget!