Why don’t people budget? It is because you (don’t fear, we have tips below to help you overcome your resistance):
- Don’t want to: You know it is going to take work to design a plan and track spending, and you would rather spend time doing something else.
- Don’t know how: You may be in the camp that just has no idea how to go about it, and has never looked into figuring it out.
- Takes too much time: You have little spare time and the last thing you would rather do is math, when you could spend what extra time you have doing something relaxing, not stressful like managing money.
- Don’t want to change: You are afraid of reality, meaning if you really saw your numbers, you might have to change your lifestyle.
- They don’t like the word budget: People hear the word, and think it means shackles and chains, and no more freedom.
- Don’t want to know what is really going on: Ignorance is bliss. You can pretend that things will just work out magically in the end .
Why people should want to budget? Here are the reasons and motivation for doing it:
- Like everything else, money is a limited resource for you (unless you are a politician), and if you don’t have boundaries and limits–no plan–you might spend too much in one area and then be short somewhere else.
- You are willing to live like no one else, so that you can live like no one else (this is perhaps Dave Ramsey’s greatest quote), you are willing to do without things in the short run (like most people are not), so that you will have more in the future (most people will not have more).
- You are tired of the same old paycheck to paycheck, never have enough lifestyle–running out of money, borrowing, and stressful financial problems–you are going to do it and experience less stress.
- Budgeting is a adult behavior: budgeting is a grownup thing, just like getting up everyday, showering, and going to work. You will feel great when you do it.
- Budgeting helps you save more for the future: those that have plans for retirement and college can limit their savings today so that they will have money to set aside for future needs. You are going to budget because you have great goals.
What will happen if people budget? You will:
- Have less stress: you will know where money is going, and that you will have enough.
- Be able to cut back in the right areas when you discover you are over spending on some things.
- Accumulate savings for emergencies and not panic next time.
- Re-pay all of your debt and save instead of borrowing next time for something you need or want.
- Accomplish future financial goals: because you are saving the right amount for them now.
- Be more wise overall with your life because it will start a trend that will spread to other aspects of life.
How to get started easily? Just do it, that is…
- Don’t call it budgeting, but instead refer to it as cash flow planning–it just sounds and feels better.
- Do some simple math: 1.) Add up what you are spending NOW in the categories of giving, housing, food, vacations, transportation, medical, debt, entertainment, miscellaneous, children related expenses, cell phones, eating out. 2.) If you have a deficit (expenses exceed income), go back and change your expenses in groceries, entertainment, cell phones, cable and other non-fixed items, until you have money left over. 3.) If you have debt, use all of your extra money to re-pay all of it. 4.) If you don’t have debt, make your goals for the future and begin saving for them.
- Start tracking spending: Use paper and pencil to get started, or Excel if you are good at spreadsheets (email me–I have a good one I will give you), or a free one like Mint.com if you don’t mind them selling information about you, or buy YNAB at www.ynab.com if you want to keep your information private. Mint or YNAB will download values from your bank and work with your smart phone to track spending easily.