So often when people are having money problems, their answer is the magical budget.
“If I budgeted, I’d probably know where all my money is going.”
“If I budgeted, I would stop overspending.”
“I should make a budget. I’ve tried it before, but I kind of just forgot about it after a couple weeks.”
Whatever version of this you’re saying to yourself right now—can I stop you for a second? I’m gonna tell you something right now that might just blow your mind: a budget probably won’t work. Here are some reasons why:
- The word “budget” has a negative connotation in and of itself. It sounds a lot like “diet,” and how often do those work out well?
- The way that you will probably go about building a budget will mix in some moral judgments and/or punishment such as, “Eating out is a waste,” or “Ouch, went to that concert last month, that’s gonna hurt.” All this negative self-talk is not a great way to keep you motivated in terms of changing your money behaviors.
- I’m guessing that you are going to build a budget that doesn’t reflect at all how you are living your life now. Yes, changes need to be made, but you can’t go from a heavy spender with little to no financial savvy to someone who posts tips and tricks on r/Frugal. You need to take incremental steps to get to where you want to go.
In short, you’re setting yourself up to fail going about a budget in this way. Budgets as a concept are not bad, but our application and execution of them usually are. The above three reasons I gave are all issues with execution.
As for application issues, I can use my fiance and I as an example. We have never built a budget because we are relatively frugal by nature. Actually, I was once far too deep into the frugal mindset; I wouldn’t even consider it frugal, I was a bit miserly, but more on that in another issue of The Trident.
We didn’t need a budget because we weren’t spending the money to begin with. We took a different approach—tracking our spending to see what our average month looked like rather than budgeting to set guardrails. The information from expense tracking was much more useful to us than the guardrails.
So what is the point of all this? What’s the takeaway? Budgets are useless and evil? You should only track spending, not build a budgeting?
No, of course not. The big takeaway is that building a budget is not as simple as picking some numbers that you think are “good” and seeing if you’ll stick to it later. Building a proper budget takes time, thought, intentionality, and may not even be applicable to you. A budget is not the magic bullet. However, it is a tool in the belt that can be used if wielded by the right person in the right way.
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