This is one of those fundamental questions that really should be addressed on my blog. After all, most of my time is talking about budgeting. While it’s not an end in and of itself, it’s just a tool, it’s a difficult to use tool; it’s a tool that takes effort; it’s not something fun; it’s got a bad wrap as that thing that removes joy from people’s lives (this is my wife’s opinion).
Delete my budget??
So why on earth would anyone budget? Life is short, after all! Should we not scream “Carpe Diem!” and light fire to our paper budgets and press DELETE to our spreadsheets and close our Mint.com and PersonalCapital accounts? Wouldn’t it be more freeing?
What brought you here?
Yes, it would be, for a while. Many of us are living right now without budgets. If you found this website, perhaps by searching for “Why should I budget?” you’re most likely free of the burden of updating and tracking your spending. However, you may have also found this website by searching for, “Where did all my money go?” “How do I get my (or my husband’s/wife’s) spending under control?” “How do I save for retirement?” “How do I save for my kid’s college?” “How do I save for buying a home down payment?” “How do I afford a new car?” “How do I take my family on a vacation?”
How does it answer those questions?
Do you see a pattern? If you want to live with dignity, responsibility and experiences, you need to have a plan on how to spend your money. I call it a budget, but many call it a “Spending plan.” You have income (presumably), and how you spend it determines how you live. So if you plan how it is spent, you have control of your life. If you don’t plan, then life will control how you spend it. It’s sort of the question, “Will you control your life and live how you want, or will your life be controlled and you will live how others want?”
You need a Spending Plan! You need a budget!
Growing up is about becoming more mature, taking on more responsibilities and doing the right things. A budget is a core component of all of these. For example, it’s easy to not have a budget and just spend money until it’s gone (or going further, to wrack up piles of debt). It’s harder, it’s more mature a behavior, to know where your money is going and where you WANT it to be going, without running out, without going into debt, and without asking for a bailout from the banks of Mommy and Daddy (if they are even willing to do that).
As part of growing up, it’s natural to take on more responsibilities, such as providing stability and support for a spouse and a family. After all, these people are the core of your life and taking care of them is no one else’s responsibility. They provide their love and their support and their hopes and dreams to you, and only you can keep them safe and warm and on the path to fulfillment. None of that is reliably possible without knowing where your money is. It’s not enough if you just show up; you need to be a cog in their life that adds value. It’s your responsibility.
The last, the hardest component of growing up is doing the right thing. Pay your taxes (in theory, it’s your ‘fair share,’ of keeping society running); save for retirement (so you’re not a burden on your friends, neighbors and children); to provide support for your children’s education (so that they can enter adulthood better prepared and as lightly financially burdened as possible); to have insurance in case the unforeseeable happens, so that you’re always prepared. All of these should have large, flashing dollar signs, because they do. None of these things are free; none of these things are fun; these are what it means to be an adult.
What about the fun? What about living?
In theory, after these above things have been addressed, you should know what you have left over to find fulfillment in your life. That money that is left over is yours. You have fulfilled all of the demands of life and your choices and there can be no denying that you’ve earned the right to live. To spend, to travel, to buy. Isn’t this really what we want to do?
But what if I don’t have anything left after meeting my responsibilities?
After meeting all of your responsibilities, even if you’re short on dollars afterwards, you should be rich. You’re rich in success. You’re rich in accomplishment. You’re rich in freedom. For some, myself included, just meeting milestones of responsibilities is enough to be happy. For folks like my wife, once she sees how little we have left, her focus, the challenge she gives herself, is to make the most of it. Maybe we can’t travel to Europe, but maybe we can go camping. Maybe we can’t see the glaciers falling off the coast of Alaska, but have we explored every museum in our area?
Life is really what you make of it. The trick is to get the needs out of the way (food, shelter, clothing) first, your responsibilities next (retirement, insurance, education, etc) and to then embrace whatever’s left as your opportunity to live fully.
Where do I start?
To me, the first thing that everyone should do when setting about a budget or spending plan is to do three things: First, track where every single penny, nickel and dime goes in a month (or three months, if it varies a lot. I’d recommend using a budgeting app or website, like mint.com, to help simplify the effort). And second, write down what you need, what you think you should be doing with your money and what you want in this life. These two tasks are difficult and time consuming, but despite being ‘short,’ life is a long journey and doing a true budget/spending plan is more of a marathon than a sprint.
Finally, the third task is to read. Read other’s success stories. Read personal finance blogs on budgeting. Read personal finance blogs on investing. Read blogs on family finances. Read books on the above topics (there are lots at the library!).
What should you NOT do at the start:
- Do not start building crazy, intricate budgets. That’s like trying a marathon without training first: You’ll either hurt yourself or you’ll burn yourself out before completing anything.
- Do not expect things to change quickly. There are reasons why your spending is out of whack, and these will need to be addressed over time. If you do too much, too quickly, it is likely to not be sustainable.
- Do not get discouraged! Looking at your lists of needs, shoulds and wants will be intimidating. But you have an entire life to meet these! Do not get too upset about where your money is going: It’s your life and it’s wonderful.
Why do I budget?
I personally budget so that I do not worry as much anymore. I used to worry about being unemployed and homeless. I used to be worried about being so buried under debt that bankruptcy was the only answer, and that’s just from LIVING, not from any disaster. I used to worry about getting sick and being unable to afford treatment. I used to fear any small disaster, like my car breaking down, would spell a downward financial spiral that I’d be unable to pull out of. I used to worry I’d never be able to sleep at night from worrying how I would make it through another day without disappointing someone in my life.
I’m still on this journey and I have a long way to go. I still disappoint some of my loved ones and I still worry that I’ve missed something, forgotten something and an unforeseen disaster will lay me/us low. But I am determined to keep working on it, to keep putting one foot in front of the other, to keep learning from my mistakes, and I invite you to come with me and answer this question:
Why do you budget? What is the goal of your spending plan?