Why bother to budget?
Posted on 31. Aug, 2010 by Forest in Debt, General, Opinion, Saving Money & Finances
As a personal finance blogger it’s almost embarassing that I don’t yet have a budget! I have been meaning to put one together for a while but my life has been pretty chaotic. Well the dust has settled now, savings are being put away, debts are being paid and I am ready for a budget to start ruling my life.
But why should I bother to budget?
Everyone has different situations, hence everyone needing a different budget. It may help for me to explain my situation a little before you call me a bad PF blogger!
A year ago I moved to Cairo with my partner. I had been living on a low wage in Montreal, Canada and came to Cairo with heavy debts but I was making the payments each and every month so was swimming just below the surface but not drowning quite yet.
I worked for myself online and had done so for a while. Earnings had been in the $800-$1500 a month range but I was paying at least $1000 to debt per month and most of that was disappearing on interest. My life was pretty basic and I lived on a very cheap vegetarian diet and was not going out hardly at all. My budget would have read somewhere along the line of food / rent /debt. I was convinced my hard work would be bringing a rise in earnings some time soon.
In January of this year I took the step to set up my debts into a debt management plan. I’ll write more about this soon but basically my debt is now looked after by a company, all creditors have frozen interest and as agreed I pay around $200 towards it per month. 100% of that $200 goes towards the debt.
Wow I was suddenly able to breath a little. Also good news, earnings were up! But the simplicity of my life here in Cairo stayed relatively the same.
My essential expenses now involve rent, groceries, debt management plan and savings. All the rest is money for me to use…. Pretty simple and easy to manage without a budget. So in many ways I don’t need a budget, and if you live like me you may not need one either.
But that isn’t the end of it. Reading excellent eBooks like Craig Ford’s How to Create a Successful Budget and Jeff at Deliver Away Debt’s excellent new series The Debt Destroyer it is clear that my life can be brought under the tight control and regime of a budget and I would benefit in many many ways.
How would a budget benefit a simple life?
- A budget makes you stick to a plan and build self discipline. Life is likely to get a little more complex here and there and instilling such discipline will mean that finances never get adversely harmed by the life changes.
- Tracking spending helps you plug the holes and find out where all the little extra cash goes. Things like extra coffee’s, chocolate bars, one beer too many and spending too much on utilities can be cut back on.
- A budget can allow you to find extra money to speed up debt repayments and give to charities.
- Knowing that you have to write every expense down and add the figures up will weigh heavy on every purchase decision. Making bad purchases will pretty much become a thing of the past.
So there you have it, it’s pretty clear that I am in favor of bothering to budget. It’s more beneficial in the long run and I am in the early stage of making mine. It will take some time because it’s going to have to start with tracking and categorizing my expenses to work out exactly where the belt needs tightening.
The flip side
Part of the reason I am writing this article is because of a recent article on MSN. The article ‘Is it Time to Dump Your Budget‘ talks about when and where you don’t need a budget. It comes from the point of view that I expressed at the top. When comfortable why bother being the slave to a spreadsheet. It gives guidelines for how to work without a budget. The strange thing is their guidelines are really not any different to running a budget and they even advise you use financial software to track and predict (yes that is a budget, right?). Anyway it’s an interesting read.
My friend Freddie Taylor at Invest with Passion also offers his insight in his article Why Bother to Budget?
What do you think, do you budget and is it worthwhile?
As always your thoughts, questions and comments are invaluable and always more fun than my bumbling posts 
.
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14 Responses to “Why bother to budget?”
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Laura@MoveToPortugal
31. Aug, 2010
I do budget..and then stick to most of it; it’s the miscellaneous/social amount that goes astray. I know that if I didn’t have the budget guidelines there I would blow it every month.
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Forest
31. Aug, 2010
Hey Laura,
Even though my misc has been fine I think I need the budget to really tune it. I am not a big spender but I have blow out days…. Like today. I went out had grilled cheese and fries, a lemonade, now having a coffee and a small mineral water…. Feeling guilty now I write it down and that is what the budget will help me with I guess!…. I better go home soon and just eat lentils for the rest of the day!!!
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Mike - Saving Money Today
31. Aug, 2010
I think budgeting is a good thing and it can help you keep a handle on your spending. But I’ll be the first to admit that I’m not the best budgeter. There always seems to be some unexpected expense that throws things off.
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Forest
31. Aug, 2010
Hey Mike, I guess the secret to budgeting well is to learn how to expect the unexpected and the make a row for that in your spreadsheet
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Red
31. Aug, 2010
First, good luck with your budget!
I have a budget, but over the last month, I’ve noticed that I didn’t input my numbers into my Excel spreadsheet AT ALL. I still keep a running list of the money I spend on a day to day basis, which helps because I look back over it through the month and see where I can improve for the next month. But once you get into a rhythm with your budget, it becomes second nature to you. It’s still definitely helpful to have that running total all month to know EXACTLY how much you have left to spend.
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Forest
31. Aug, 2010
Hey Red,
I think when you have the numbers down if you stick to them then you are effectively still budgeting…. This is how the envelope system works I guess (something I may try).
On another note I was trying to comment on your post but my computer isn’t letting me for some reason…. Will be back in a while to give it another try.
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Carol@inthetrenches
31. Aug, 2010
Forest,
It does sound like you did actually have a budget but that it was so simple that you did not need to write it down. With only 3 line items you actually saved a lot of time by not committing it to a large budgeting system.
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Forest
02. Sep, 2010
Hey Carol, Haha, I guess I did have a budget of sorts. I plan for it to get a little more involved now though. I have started tracking all personal spending as of yesterday.
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Ramblings of a Woman
31. Aug, 2010
I hate to say, but while i was working the past 2 years, as well as my husband, we made more money than we have ever made, and we didn’t really budget. We didn’t really increase our major expenditures, didn’t buy properties or new cars, we did take a couple of vacations, but not around the world or anything.
We just spent it, on dining out and entertainment and who knows what else. And we could have paid down debt, well we did pay down a little, but we could’ve paid down A LOT.
And now I am not working again. We can live off his salary, but we wasted all that money that couldve paid off 2 more credit cards.
If we had been following a written budget, at least I would know where it all went, lol! Back on the one salary, we have to follow more of a budget or we will run out of money before the month ends.
Bernice
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Forest
31. Aug, 2010
Well Bernice we are all responsible for some heinous financial mistakes and that’s often what makes us qualified to talk personal finance, frugality etc on our respective blogs.
I am sure that with a budget you will destroy that debt. I feel a budget will really get my savings goals smashed too.
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Budgeting in the Fun Stuff
31. Aug, 2010
I budget like a crazy person, but it’s not necessary for everyone. As long as your bills are paid and you are saving enough (or more than enough) for your future, I don’t think the actual method is a big deal. And this is coming from someone who is very happy with her zero-based budget and keeps up with every, tiny charge…
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Forest
02. Sep, 2010
Hey Jocelyn, I don’t know that I could track every tiny detail but for me right now it’s about plugging the holes and cutting down on unnecessary expenses from chocolate bars to eating out too much.
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Mrs. Accountability
04. Sep, 2010
It’s so much easier to keep to a budget when one is single, or truly the only one managing the money. I manage our money, but getting my husband to adhere to a budget is simply not practical or realistic. It just makes me feel like a nagging hag, and he doesn’t pay attention to that kind of detail anyway. He’s not one to spend a ton of money for the most part, and the only “toys” he buys are new tools for his business, when and as needed, so they are business deductions. I have a budget outlined and I track our expenses in Quicken. I do like the feeling of knowing what we spent our money on in the last few months or year.
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Forest
05. Sep, 2010
I have just been facing that a little. My partner and I both need to budget but we run separate accounts for the most part. Our needs are all simple but we will need 3 budget sheets…. 1 each and then 1 for joint expenses.
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