It’s true; there are many folks out there who successfully manage their household finances without ever using a budget. Even so, most successful home money managers that don’t have a budget still track their expenses and income. That’s because trying to get a handle on your personal finances without knowing how much money you are earning and where it is all going is tantamount to driving with a blind fold.
The bottom line: Analyzing your finances and tracking your expenses is a crucial element of managing your personal finances. Doing so reveals hidden money leaks that help you better allocate your resources and ensures you get the most out of your income.
Photo Credit: Gastev
I’m one of those people who don’t use a budget, because I don’t care which category my money is spent in. But, I do know how much is coming in, how much is going out and where it’s going. I have always been very good with numbers and doing them in my head isn’t a problem. Also, my income and expenses are relateive stable.
Most important, I save a big chunk of my paycheck, before I spend a single dime.
As my income has risen, we’ve basically stopped budgeting — but we still keep meticulous track of our expenses too, Bret.
And I agree; having your savings and as many bills as possible deducted from your paycheck helps a lot when it comes to getting by without a budget.
I can’t imagine not having a budget. I’d be back to square one; over drafting my bank account and not knowing where all my money went! I’m so glad I figured out long ago how to make a budget and stick to it (for the most part. 😉 )
Budgets were really important to me when I was making a lot less. I couldn’t have managed my finances without one, but I know lots of folks who really think they are not necessary. But that’s why it’s called “personal” finance, right, Jen? 😉
Regarding the road maps, we do still budget for what I call “strategic” goals — that is, big stuff like vacations, house remodeling, etc.
We just don’t do it for the more “tactical” stuff anymore like groceries, clothes and utility bills. I think the only thing we still try to budget for on a monthly basis is eating out at restaurants, if only because those costs can really escalate quickly if you’re not careful.
I cannot ever imagine not having a budget. when I was 12 years old by a month, I had to pay rent, due on the first, every single month my evil Dad and his crazy wife.
As more stuff and life happened, I always waited to have the money, on the first of the month, always…now for over thirty years. I not only had a budget, but I lived a month ahead from the beginning of my money making career, let it be mowing lawns, etc. I did not like to babysit, and I am female, bur I would do it occasionally for the cash.
I am forty eight.
I have lived my whole life in a budget, there is no free for all at my house.
I will not put down my potential retirement because I spent money at Starbucks, etc. I know where every penney goes, and always have.
Spedie, the just about millionaire..
You’ve really got your act together, Spedie. That’s awesome! Let this be a lesson to all you folks out there who think budgets and tracking expenses aren’t important; they are!
I adore the parsimony of your writing. Well put. Budgeting gives a sense of control, and who doesn’t want financial control?
Why thank you, Barb! Sometimes I like to get right to the point.
I don’t budget as frequently as I did a few years ago, but I still feel the need to write down where I want my money to go at least once a month. It makes me feel powerful over my money. Also, I do think it’s important to know where your money is going. For instance, I want to know I’m spending $700 a month on food. That lets me know there’s possibly some waste or mindless spending in that category. Obviously, money that’s not put to its optimal use can and should be allocated elsewhere.
I think budgeting can be simplified to tacking two categories:
% Saved
% Spent
You can divide the % Spent up into categories to try to optimize them and get a higher %Saved, but if you are happy with your %Saved you don’t need to, and after you have optimized your spending once there is much less to gain by doing it again.
If you make the % Saved automatic (i.e. payroll deductions & automatic transfers) then you just have to make sure you spend less than you earn. I find it is fairly easy to keep an eye on my bank balance for that- any time I come close to $1000 left I need to cut back on spending for a while. If the balance drifts up I can spend a bit more.
-Rick Francis
This is basically how I do it now too. I’ve had a budget since my first job at age 10. I’ve pretty much taught myself not to spend money. I save over 50% of my take-home off the top. The rest can be spent, and since I spend so little I can keep a close enough estimate in my head or wallet.
Similar to some other commenters, I have my savings and retirement, and many of my bills automatically deducted from my pay. I have a few checks I write, and I have them in their envelopes and ready to mail on payday. At that point, whatever is left, is what I have to spend. Groceries, gasoline, entertainment. Oh, and I keep a ‘sinking fund’ for occasional items like clothing and
car insurance.
I only use a pen and my notebook to do all the budgeting stuff that I need to do, and it really helped me track of my money well. I was also able to save more money by just following my budget plan.
Having a budget has been essential to my sanity and to helping me get my finances on track after accumulating tons of debt from my startup. Also I just made the decision to buy a house; my budget was what helped me determine the kind of house I would get. I sat down with my financial advisor and looked at my budget and said, “no I dont want to disrupt it by taking on a huge mortgage even though the bank says I can afford more, I want to focus on paying off this house and getting another property for investment purposes instead and a huge mortgage will hamper those plans.”
Amazing, Len. How do you make such good points with so few words?
Starting out we lived on a strict strict budget because we had to. But it allowed us to purchase and pay off a house. We would not have made it without one.
You know what? life is backwards. When you’re young you need that extra cash. When you age. not so much. I am in my late 60s now. For years I have told my fellow old timers to relax a little and spend a bit…think about retiring early while your health is still good.. My closing pitch, “You won’t need more money in your 70s, or later. Use some now”.
Wise advice, Paul. I am pretty sure our true “golden years” for retirement are in our 60s and early 70s. After that, things tend to get a lot tougher, health-wise.