You Might Need a Budget If…
To budget or not to budget? In my last post I described Why We Don’t Budget except once a year. A slight misunderstanding of budgeting could lead people to spend more out of habit; however, it doesn’t mean budgeting is a useless tool that should be avoided by all. You can’t throw the baby or the budget out with the bathwater. Yet many people “budget” but are always broke or spinning their wheels financially.
So let’s bring some fun to the budgeting dilemma by exploring signs of whether you need a budget or not. Disclaimer: I’m not a certified financial professional or a comedian.
You might not need a budget if…
- You have gum recession from brushing & flossing your teeth too much. (Um, yeah, that’s me.)
- Your idea of a wonderful date is hiking and drinking water.
- Your favorite foods are oatmeal and peanut butter.
- You’ve been called frugal, thrifty, a tightwad, or penny-pincher.
- You spouse throws away your favorite clothing behind your back.
- You’re an engineer who loves optimizing everything.
- Your last impulse purchase was clothespins.
- You hate the mall.
- You check your online accounts every day.
- You can anticipate the answer on every one of Dave Ramsey’s radio show calls.
- Your spouse has to tear you away from Excel to watch Shark Tank.
- You are proud to still be wearing shirts from high school.
- You know how much your average monthly utilities cost.
- You have a natural aversion to spending.
- You have a natural aversion to debt.
- You “pay yourself first.” Savings, investments, and giving are automatically deducted from your checking account or paycheck at aggressive rates.
You might need a budget if…
- You floss once a month, whether you need it or not.
- You have consumer debt.
- You need a good excuse to tell your spendy friends no.
- You don’t have a peanut butter sandwich in your bag at all times.
- You have a hard time remembering prices.
- You were born with a case of wanderlust.
- Your last impulse purchase was a piece of clothing or technology.
- You don’t know how much you spend on groceries or gas.
- You love the mall (or Target).
- You’re excited to get a big tax return so you can pay some bills.
- You are proud to be wearing clothes from the consignment shop.
- You’re pretending to be frugal by finding discounted ways to increase your lifestyle.
- You’re not investing at least 15% of your income.
- You’re experiencing lifestyle inflation, where your expenses always seem to outpace your income.
- You have emergency savings, but not enough to weather a 3-6 month unemployment.
- You want to be more generous (don’t we all?).
You definitely need a budget if…
- No amount of dentists are ever going to get you to floss. (J/k this is not relevant.)
- You think your Starbucks Rewards card is saving you money.
- Your consumer debt is growing.
- You live paycheck to paycheck.
- Your plan for emergencies is your credit card.
- You don’t naturally have a memory for numbers, beyond your age and phone number.
- Your last impulse purchase was a car.
- You don’t know how much your monthly rent or mortgage payment is.
- You are proud to still be wearing clothes from last year’s trends.
- You are not investing enough to receive your full employer match.
- You never have any money left to give.
There’s no shame in needing a budget. In fact, we should probably be ashamed of writing a financial blog while not budgeting. Or of being so naturally uptight that we don’t need one. You have to find out what works for you. Just remember these cautions when it comes to budgeting:
- A budget is more than a list of expenses. It should include “paying yourself first” by saving and investing. Actually, we prefer to “pay God first” by giving a percentage of our income to our church and some charities. But next we immediately send money on its way to our index fund and early debt payoff. You might put money in savings for emergencies, your next car, a vacation, next Christmas, or any other special expense that you can (or can’t) anticipate.
- A budget is not a license to spend. Do you have blow money budget lines (a.k.a. Ugly Christmas Sweaters)? Do you really need all that blow money, entertainment spending, or clothing every month? If you budget it, you’ll likely spend it. Why not try to see how little you can spend, instead of asking how much you’re allowed to spend?
- The goal of budgeting is not to avoid “going over budget.” Sometimes those BS lines exist because people don’t want to go over budget. Their solution is to overestimate and over-itemize. Keep it simple and budget as few categories as you can, so you can actually keep track, and so that you don’t give yourself reasons to spend when you don’t need to. The goal of budgeting is to get your money where you want it, not to avoid going over. Rules, like budgets, are made to be broken. Life happens, you meet unexpected expenses, but if you’re meeting bigger financial goals you’ll be better equipped to weather these blows.
- Remember to plan NOT to spend. Pick a category in your budget and look at it through this new lens, asking how to optimize that expense. Challenge everything, as J. Money suggests. Just because you’re always paid XXX for food or electricity or your cell phone doesn’t mean you always have to. For example, we used to budget for firewood, but now we’ve found ways to stock up for free, and this also reduces our winter gas bill. Decide if there is a step you can take to reduce expenses. Take it one line at a time so that you don’t get overwhelmed or quit. We’ll share some tips on areas like utilities, entertainment, and more in upcoming posts.
Lastly, choose a spending strategy. We prefer to automate as much as possible, using “frugal autopilot” a la the Frugalwoods. Others prefer the hands-on regulation of cash envelopes recommended by Dave Ramsey. Whatever you decide, be sure to track your progress for an objective assessment of how effective the method is for you.
For more on our philosophy of budgeting, check out Why We Don’t Budget.
What other questions or caveats would you add to help someone decide whether they need a budget?