Do You Really Need a Budget
Basic budgeting. It’s like the 101st Personal Finance Lesson, and let’s face it, book covers and budget guides seem more focused on a high school student than you, a competent adult who somehow manages to usually have enough money to of things.
You probably feel that you are too advanced to need a budget. You have a retirement account! You pay your bills automatically! You have it, right?
I know you don’t like doing this. But I’m here to advise you to sit down and do it anyway. You need a budget.
(Note: I’m not talking about the book and app of the same name, although some Lifehacker authors love and live by the You Need a Budget system .)
If you are sneaky when it comes to money, let’s take a look at how budget failure can hurt you.
Would you half hurt your health?
Let’s say you go to your doctor for an annual check-up. All the way you grumble about it. “I don’t know why I am worried,” you think. “I am well!”
You go to the doctor, get on the scales, measure your temperature and blood pressure. The nurse hasn’t expressed any concern about these baselines, so you get off the table. “I’m fine,” you tell them. “Things are good.”
The nurse can’t make you stay, but they also can’t tell you what the doctor might have noticed when they looked at your nose and throat, or listened to your heart, or nagged your belly to get a feel for what organs they were feeling.
If you leave without a full check-up, you cannot be sure that you are truly healthy.
It’s the same with your money. The fact that you live until the next payday with a positive checking account does not mean that you are managing your money in the best possible way. You need to get a better understanding of your money in order to determine what is going right, what is going wrong, and what can be changed a little to make life better.
You must be proactive with your money
It can be difficult to categorize your spending if you’re not sure you really want to know how much you spend in restaurants or breweries in a month. Maybe looking at your childcare costs makes you feel sick. You may be saddened by the monthly student loan payment.
But it’s time to break through and organize. If you don’t, your unawareness may bite you again.
Just this week, one of the readers commented that they had painstakingly put together a budget, and a few days later learned that their income would decline during the pandemic. That’s reason enough to be upset, but this person also seemed frustrated that he had to adjust his budget to accommodate lost income.
And listen, adjusting your budget to figure out where you can cut costs in jam – no one imagines a super fun night out. But this reader is in luck: they didn’t start from scratch. Instead of staring at a blank spreadsheet, frozen with worry about his money, this reader had a baseline, a starting point. It was about adjusting their budget, not creating it from scratch.
That’s when you really need a budget: when shit is going sideways and you need to make a plan quickly. When there is a job loss, illness, or unexpected expense, it’s not time to sit down and say, “Today, I’m going to budget!” Because by then it’s too late. By then, you are responding to any outside pressure that dictates how you spend your money.
If you are budgeting when things are going well (or at least okay), you are taking proactive steps to protect yourself when the unexpected happens. You make a plan that makes it easier to adapt to the worst-case scenario.
How to Build a Budget You Don’t Hate
The trick for creating a budget that doesn’t discourage you is to mentally imagine what your budget looks like and throw it away. There is no single table to manage all of them, or a single method that works better than the rest.
The best budget is the one that works for you. And it can take trial and error to find the one that works for your personal situation.
I recommend trying a budgeting method for at least three months to see if it suits your lifestyle.
Several options to get you started
The 50/20/30 Method : You divide your spending into three main groups: basic (50%), financial goals like saving or paying off debt (20%), and discretionary spending (30%).
The 60/40 Method: You spend 60% of your money on essentials and 40% on everything else, including savings goals.
Kakeibo Method : You group expenses into four categories: survival, extras, extras, and culture. What’s in which category? Making a decision for yourself is half the fun with this method.
Zero Base Budget : You give every dollar to work and aim to have $ 0 remaining / unaccounted for art by the end of the month.
If you want to try one of these budgeting styles, you can search the web for templates that make keeping track of math calculations a bit easier.
If you budget with the app, you are focusing less on the budgeting method and more on monitoring your spending every day. (App lovers, share your favorites in the comments for readers looking for their first budget app!)
Stick to
Here’s one more thing to keep in mind when budgeting: you ruin everything.
I guarantee it. You will forget that you only pay for your car insurance twice a year until that large sum arrives, or you forget to classify piano lessons for kids.
This is fine. Because a budget is not something you set and forget. This is what you cultivate over time. You will make adjustments, make a copy of your current budget to work through a few scenarios, you will get a raise, and you will need to allocate these funds wisely.
And you don’t want to just dive into next month – a smart budget employee looks over the previous month to see what worked and what didn’t while waiting for next month.
It’s all about being proactive, and if you check your money at least once a month, you are on your way to financial health.