100 Words On: Why Budgets Are So Important (for Most People)

True, not everybody needs a budget to successfully manage their personal finances. People who have minimal debt, pay off their credit cards in full each month, and have little trouble saving can often get by without one. For most folks, however, a budget helps them track expenses, control spending, set aside cash for retirement and rainy days, and save for vacations and other big-ticket purchases.

The bottom line: A budget is not just a plan for your money. It’s an important tool for keeping finances under control and providing the ability to make calculated decisions about how to allocate household income.

Photo Credit: brad montgomery


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    I completely agree with you that budgets help you determine a plan for your money and keep you focused to reach your goals. It’s one of the best things I’ve done for my family, and without it I don’t think I would have reached my goal of saving a quarter of my income last year.

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      Len Penzo says

      Although I don’t budget so much now as simply track expenses, when we were first starting out budgeting helped my family get by too. Couldn’t have done it without it!

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    DC says

    Back when money was a lot tighter for us, we faithfully kept a budget. This was before inexpensive/free budgeting software was readily available. What we had was a loose-leaf notebook with tabs for each budget category. It worked well for us – basically an “envelope” system.

    For example, if the “eating out” tab showed a zero balance for the month, but “clothing” had plenty of money accumulated, that presented us with a choice: Do we forgo restaurants for the rest of the month, or “eat” the nice sweater we were saving for by transferring funds from one category to the other?

    After all, the purpose of a budget isn’t to enslave you, but to make you aware of your choices.

    We haven’t kept an official budget for many years now, but the habits and discipline from our budgeting years have stayed with us. Our only debt is the mortgage, and we maintain a spreadsheet amortization schedule which tracks the balance to the penny, so we can play what-if projections if we decide to speed up the rate of payoff. A 2nd spreadsheet tracks major expenses at a high level, not at the detail level of a true budget, but it keeps us mindful of expenses that occur at less than monthly intervals: Property taxes, insurance premiums, etc.

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      Len Penzo says

      It sounds like you and I followed the same track with respect to budgets; we’re pretty much in the same boat now. We continue to track every penny we spend on the same spread sheet we’ve been using for the past 14 years or so, which we use mainly for future projections and those what-if games you mentioned.

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    @DC – We are in the same sweet spot that you are, except that we are mortgage free!

    We too still use a spreadsheet to track major expenses – ones that come just a few times a year.

    I also go back and analyze what our expenses actually were, but only started doing this during the years immediately prior to retiring and will probably continue for a few years into retirement. This was initially just to make sure we could really afford to retire.

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      DC says


      Wow, that’s where we want to be. Picture Homer Simpson drooling over a doughnut, and that’s us thinking, “Hmmmm. Mortgage freeeeee.”

      If feels like jinxing it to put this is writing, but one of our goals is to have our mortgage paid off by May 2012.

      I have this theory major ticket items like cars, refrigerators or washing machines choose to break down when when you are working hard to achieve a financial goal that doesn’t include them. :)

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    I think the biggest thing to note is how you mentioned a budget is not just a plan for money. A carefully organized and recorded budget accurately tells us what we take priority in with our day to day lives when we get a chance to see where our finances are going at a glance. If more folks were to practice establishing a budget, whether for tuition, savings, loans, etc, the small ‘guilty pleasure’ purchases would be made much more apparent in how they affect our true goals for saving over time.


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