Saturday, May 27, 2017

Why Keep a Budget

Companies keep track of every penny. Why don't we do the same in our personal finances?

Why you should budget when you're broke

Budgeting when you are living paycheck to paycheck is extremely helpful. Instead of wondering if you will have enough money to pay rent or get some gasoline or groceries, you'll know exactly how much you can allocate to each expense.

Some people probably think that keeping track of every penny is tedious and would actually feel more like they are a prisoner to their money. But actually, it gives a sense of freedom. You know that you can spend $20 on gasoline and you'll still have enough money to buy a new pair of work pants that you've been needing. Or, you will realize that you've been spending way too much money on going out to lunch so you will start packing PB&Js.

If you are broke or just over broke, budgeting can help you escape that paycheck to paycheck lifestyle. After a couple of months of keeping track of your budget and spending habits, you will see where the waste is. You might start to get motivated to slash the waste and use those funds to pay down debt or save.

Why you should budget when you have plenty

So do you stop budgeting once you've "made it"?

I wouldn't recommend it. Even when you have more than enough to cover all the basic expenses, a budget will continue to help you thrive and grow your wealth. You will be able to track how much you are saving and investing each month and a budget will also give you a plan to save up for larger purchases (vacation, new car, etc).

Like I said at the beginning of the post, businesses keep track of every penny. Companies who go under due to money problems usually have warning signs months in advance if they just took the time to look at their books. We need to do the same if we want to prosper.

If you feel that your money isn't behaving and doing what you want it to do or if you feel like you're a hamster spinning in the wheel without making any true progress on your goals, try budgeting. Seriously. Give it three months. If it doesn't help, you've only lost a little bit of your time. If it works, you'll gain a whole new sense of security.

Budget resources

You can keep track of your budget with pen and paper. But if you want something more advanced, there are a ton of budgeting resources out there and many of them are free or extremely reasonable. Here are a few that I use or am aware of which are available online and/or on Apple or Android phones:

  • Every Dollar (completely free with optional upgrades. I use the free version and love it)
  • YNAB: You Need a Budget (free trial and then $50/year. My parents use this one and have enjoyed it)
  • Mint (supposed to help you pay bills, budget, and track investments)

Do you budget?
If so, what tool(s) do you use?

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