A budget in your head isn’t really a budget
February 7th, 2008 | by mbhunter |(This post is part of a Money Blog Network Group Writing Project on budgeting.)
I’ve made it one of my goals this year to track my expenses better. Budgeting using The Force worked when I was single, but throw a wife and a kid in the mix, the cushion that makes this kind of “budgeting” work goes away. I found that we weren’t getting as far ahead as I’d like. Time to become a grown-up and exercise some discipline in my personal finances, and part of that involves coming up with a written budget.
Actually, I’d go so far as to say that a budget that isn’t written down isn’t really a budget. What had been passing for my budgeting was general frugality. That had let me get by for a long time without having to carry a balance on a credit card or to go without necessities. But as far as deliberately planning to save up for a big purchase, or allowing myself $15 per week for eating out, that was absent. But this planning shouldn’t be absent, and it can’t be absent in an integrated financial plan, because spending baselines give a concrete reference point to distinguish smart spending from sloppy spending.
Though it’s a good exercise to track all inflows and outflows of funds, with budgeting it’s a little different. After tracking all expenses for a month or two, a pattern should emerge as to where the big leaks are. Once those one or two big categories of discretionary expenses are exposed, developing a budget that targets those expenses is a good start. For example, we spent over $600 last month on groceries. (I’ll have to double-check this; that seems high even for us. But even if it’s only $500, that may still be too high, though we drop nearly $100 on soy milk for our daughter because she has a dairy allergy. Anyway…) Targeting that line item will be a good start. For example, DiGiorno Pizza, even on sale, is still pretty expensive for the nutrition. Maybe we can scale back on that a little bit.
The main point is that a written target for groceries (say, $300/month) makes the goal real. Saying “we’ll spend less on groceries” doesn’t have quite the commitment behind it, and it can’t be tracked really except in hindsight. Proactively getting those desires out of our heads and into a spreadsheet or Quicken or You Need A Budget or even just a spiral notebook makes achieving that goal much more likely.
5 Responses to “A budget in your head isn’t really a budget”
By Ron@TheWisdomJournal on Feb 7, 2008 | Reply
I would add: A Budget Written in Excel and Never Opened Again isn’t one either.
By Saving Freak on Feb 7, 2008 | Reply
To quote Joe Sangl, “A written budget is different than a written budget that is followed.” I have seen so many people go through the trouble of writing out a budget and then not follow it. They come back and say the budget didn’t work. If you really follow a budget you will win with money.
By Roman on Feb 7, 2008 | Reply
Would like to receive your comments to a statement: “If you are aimed and being frugal – you are aimed at poverty.” Money attracts money – so deciding to save on everything as much as possible to attain a savings goal – may not be the best idea – as you might be loosing a bigger picture of what and where you want to be. Rather – you are focusing on your current status and lifestyle. It is so great to have a lifestyle dream rather then an X number of dollars on savings account dream.
By Mrs. Micah on Feb 7, 2008 | Reply
Yeah. I did pretty well with one while I was in college, though. Only in my senior year did I start budgeting.
What I did was keep track of my income and outflow, by checking my online banking. As long as the income was greater, I figured I was ok.
By mbhunter on Feb 7, 2008 | Reply
Roman: Money does attract money but frugality (or living beneath your means) makes it stick. It’s unlikely that you’ll be living in poverty if you’re frugal.
Thanks for the comments everyone!