Budgeting – I know you hate it, but let’s do it anyway

Budgets Doomed

Budgeting:  Why we hate it and how to make it our friend.

Do you know why so few people have a budget?  Because budgeting stinks!  Budgets are just like diets.  They call to mind what you can’t do and how you can’t enjoy life.  A general feeling of deprivation surrounds the word “budget.”

And, as we all know, deprivation can only last so long.  That’s why people on diets tend to be overweight.  They look at a diet like a wagon just waiting to be fallen off of.  And, when they do, they have feelings of failure that they try to make better by eating Ho-Ho’s.

Budgets are the same way.  Long term, we won’t continue if we think of all the fun we’re NOT having by all the spending we’re NOT doing.

How does this sound instead:  Spending Plan.  Instead of saying, “I’ll never go out to eat until I get my credit card paid off,” try, “I’ll eat out for one lunch and one dinner per week until my credit cards are paid off.”  Chance is are, that’s a lot less than the 3 lunches and 4 dinners out you are doing now, so money will be saved and goals will be achieved.  But, instead of telling yourself what you won’t be able to do, you are telling yourself what you will do.

Budgets Keep Buying

What stymies most people in creating a spending plan is what is perceived as that necessary first step:  Writing down everything you spend for a month to see where all the money goes.  That is one way to start a spending plan.  After all, it’s more realistic to make a plan based on what’s currently happening (groceries are $400/month) versus what you wish were happening (I will only spend $200/month on groceries).

Great news!  That first step doesn’t have to be terrible.  There are websites out there that allow you to download all of your credit card and bank info into digestible pie charts and spreadsheets that show where you are spending your money.  The most popular one is http://www.mint.com/, but there are others.

If you are not comfortable with the thought of an aggregator service like that, just use the tools on your credit card and bank website.  Most of them have a tool to download your expenses into pre-defined categories.  This way, the only things you have to manually track are cash purchases.

Next blog, we’ll go over the first of 3 spending plan methods:

  1. Envelope Method
  2. Save First Method
  3. Write-it-down-and-track-it Method


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