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Why Budget Isn’t a Filthy Word

A budget is only as complicated as you want it to be. In most cases, a budget is no more than your income minus your outgoings and savings equals zero.

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Why Budget Isn’t a Filthy Word

James Pearse Connely once said, “Budget affects everything.” Simple, but potent words. After all, budgeting has the power to:

Despite the benefits, an outlandish 65% of Americans don’t know what they spent last month. Why? Well, a lot of people think that the world itself is just downright filthy. But, let’s dispel why that’s not exactly true. 

Why Budget Isn’t a Filthy Word

1. It’s not as time-consuming as you think.

“For the first few months, you might spend a couple of hours a month getting your budget down,” state the financial experts over at Ramsey SmartDollar. “After that, it’s pretty much smooth sailing. You’re simply plugging in numbers and letting math do the rest.”

Wait a minute. A couple of hours each month? I thought budgets weren’t supposed to be time-consuming?

Initially, this may seem like a serious time commitment. But, consider that on average we waste 2.8 hours per day watching TV. Just imagine if you reduced that, even just be 30-minutes a day. You could quickly come up with the time to create and review your budget.

“So if you’re currently not doing a budget because you ‘don’t have the time,’ then your priorities are out of whack,” add the Ramsey team. “Because if you’re too busy to make your money situation a higher priority, then we would be curious to see what you do have the time for.” 

Oh yeah. Once you’ve created a budget, you can use budgeting apps like Mint, Personal Capital, Goodbudget, or EveryDollar to automate your budget. These apps will update in real-time, replacing the need to do this manually. They also come with features like smart suggestions, payment reminders, and tracking. 

2. Budgets are only for those who are…

Everyone needs a budget. You might think that you’re the exception to the rule. But, I have some bad news for you, you’re not. This is true regardless if you are:

  • “Too broke to budget.” I understand that you’re struggling to make ends meet. But, a budget is definitely needed so that you can maximize your income in order to become more financially stable. 
  • “I’m loaded.” On the flip side, some people don’t budget because they’re well off and aren’t stressing over money. That’s all well and good. However, just because you’re raking in the dough doesn’t mean that it’s always going to be there. A budget ensures that you’ll always have money flowing in. 
  • “I don’t have any debt.” Again, you deserve a high-five for not being in this position. But, do you have anything set aside for an emergency? Are you positive that you won’t be tempted to overspend just because you’re debt-free? Budgets help address both of these problems if they arise. 
  • I currently do not have any savings goals. Just because you’ve already reached your financial goals doesn’t mean that that’s not going to change. For example, when you have children, you’re going to reevaluate your budget so that you can keep up with your expenses and savings while being able to meet new goals, like setting money aside for your kid’s education. 

3. Budgets don’t have to too restrictive.

Budgets aren’t so strict that there isn’t any wiggle room. Instead, a good budget is realistic, yet flexible. In other words, after you’ve taken into account all of your monthly expenses you should have enough leftover so that you have some breathing just in case you occasionally overspend or engage in a vice

4. Budgeting isn’t overly complicated.

A budget is only as complicated as you want it to be. In most cases, a budget is no more than your income minus your outgoings and savings equals zero.

“This means that all the money going out should be the same amount as the money coming in,” explains the folks over at EveryDollar. “So if you make $4,000 a month, you’re giving all $4,000 a job: paying bills, saving money, paying off debt, and living life! When you add in every source of income and then subtract every single expense, your budget should end up at zero.”

There is a caveat though. Your bank account should never hit zero. That’s just asking for trouble. “Keep a little buffer in your checking account of about $50–$200, depending on what works for you.”

“But your budget should hit zero every month,” clarify the EveryDollar team. “Because you’re budgeting allthose dollar bills. Every. Single. One. Your money won’t disappear when you’re watching and assigning every dollar to a specific budget line.”

5. You don’t have to be a math whiz.

Brace yourself for this one. Budgets aren’t really about addition and subtraction. Rather, budgeting is more about planning. 

Sure, There’s third-grade arithmetic involved. But, we can all handle that part — even if you’re like me and despise math. Even better? Most budgeting tools will take care of this for you. 

6. Budgeting doesn’t equal deprivation.

In my opinion, this is the main reason why people don’t bother with budgets. They believe that having a budget means not having fun or enjoying yourself. The thing is, being frugal and responsible with your money doesn’t mean that you have to deprive yourself. 

In other words, budgets should be used to guide in making more sound financial decisions. For example, you just paid all of your expenses for the month, contributed to your savings, and have $200 to spare. You could take some of the excess money and go out with your friends. If you don’t have the extra cash, you should give your friends a rain check until you do. 

7. Tracking isn’t budgeting.

“That’s a start, but it’s not a budget,” state the SmartDollar team. “Because when you only track spending, you’re just looking at the past and never looking forward.”

“Your budget is your plan for the upcoming month,” they add. “You’re planning the money you haven’t spent yet. When you keep receipts or use your online banking to see what you spent last month, you’re doing just that—looking at last month.” 

“Look forward and back—not just one or the other,” the Ramsey team suggests. “If you’re already tracking your spending, the budget is just a natural next step. It should be easy for you.” 

8. No matter what, unexpected expenses will always pop-up.

What’s the point of a budget when unexpected expenses are always creeping in the shadows? I’m talking about flat doors, emergency vet bills, or higher than expected tax payments. 

But, this is exactly why you need a budget. It will keep your spending in-check and guarantees that you can stash something away so that you can address these unforeseen expenses. 

9. I’ve made it this far. Why start a budget now?

Congratulations! Give yourself a pat on the back. But, regardless of what stage you are in life, you can always use a budget to make sure that you will always enjoy a comfortable and satisfying life. 

Which budgeting method should you use?

To be honest, that’s totally up to you. But, you can start with the popular zero-based budget. As a reminder, this is just when all your income minus all your expenses equal zero.

But, if that’s not working out for you, consider giving one of the following methods a test drive:

  • 50/30/20 Rule. Here all your monthly spending and saving is divided into three categories: needs (50%), wants (30%), and savings (20%).
  • 60% Solution. This is where 60% of your income is thrown at essentials like housing. The remainder is broken into the following categories: 10% to retirement, 10% to short-term savings for irregular expenses, 10% to long-term savings for emergencies.
  • Reverse Budgeting Method. With this method, you start with your savings. After that, you tackle your savings, essential expenses, and finally nonessentials. Basically, this is “paying yourself” by prioritizing savings without neglecting the necessities. 
  • The Envelope Method. For newbies, they might want to try this method where you make an envelope (physical or digital) for all of your monthly expenses. Next, you fill it with the money that you’ve set aside for your expenses. When it’s empty, you’ve reached your spending limit. Essentially, it’s a set-it-and-forget-it budget. 

If you try one method and it’s not working, switch to another method until you find one that clicks. Just make sure to be patient. After all, creating and following a budget rakes time and patience to perfect. But, it’s well worth it! 

Why Budget Isn’t a Filthy Word was originally published on Due by John Rampton.

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