Why You Can't Stick with a Budget
This video is about one of the most important tools for destroying debt: a budget. Creating a budget isn't all that hard. Sticking with one over time seems to be the tricky part. Is it possible to have a budget that you actually look forward to using? I know it is, because I've been doing it for years. First, watch this 90-second news story I recently shot about budgeting, then meet me on the other side for more specifics.
Whether your goal is a bigger bank balance, a smaller credit card balance, or a trip around the world, the fastest path to achieving it is using a budget to fine-tune where your money is going, to find extra money and to measure your progress. Getting closer to what you want every month isn't a chore; it's a pleasure. If you've tried a budget in the past and given up, it's probably for one of the following reasons:
- You didn't have a goal: You need something to move toward.
- You started depriving yourself: Don't go on a dollar diet. Do the things you love. Just pay less.
- You suffered a budget-buster: Some unplanned expense or loss of income set you back. Expect the unexpected. Be flexible.
- You got bored: Many people start a spending plan when they need one, then give it up when they don't. That's a sign you need a bigger goal.
For more about budgeting, here's a condensed cut-and-paste from my latest book, Life or Debt 2010.
The perfect budget isn't a budget.
Let's start our search for the perfect budget by never using that word again. The word "budget," implies deprivation, like the word "diet." I'm no fan of deprivation, are you? So let's exchange that term for a different one: "spending plan." A budget restricts what you do. A spending plan is about making conscious and completely voluntary decisions about how to allocate your money.
So a spending plan doesn't mean doing without, it simply means creating priorities in order to reach a specific goal.(See my story on setting goals.) You start your plan by keeping track of where your money's going. Once you've done that, you're in a position to make decisions about how to allocate your money and spend it according to your personal priorities. And one of your first priorities should be destroying your debt.
So here's the drill. Start writing down everything you spend — every penny, every day. A lot of this you're already doing. When you write a check or use your debt card, you're obviously writing down the amount and payee somewhere, right? When you use a credit card, it shows up on your statement. When you have money taken out of your paycheck, it shows up on your check stub. So when we talk about keeping track of every dime you spend, what we're really talking about is where your cash is going. The way to keep track of it is to carry around a small notebook and simply make a note of the amount and what you bought whenever you spend cash. You'll get used to it in no time, and it's really not that much of a hassle. Then all you need to bring your spending plan to life is to transfer those numbers to a form, online or off, so you can review it.
Where do you get that form? There are tons out there. Here's a link to about 10 budgeting spreadsheets, including the one I personally made and use daily.
If you think you don't have the time, you think the whole idea seems anal, you think you don't need to do it because you're already so great with money…whatever your excuse…you're wrong. Here's why.
Writing down and reviewing the money you're spending will result in spending less. That's simply because you're thinking about it. If you doubt that, that's because you haven't done it.
When you see where your money is going, you'll be in a position to reduce that amount by harnessing some of the thousands of money-saving tips available on Wise Bread, my website, and many others.
You'll also get a feeling that may seem foreign to you right now: it's called control. Going through life without tracking what's coming in and going out is akin to driving while texting. It's distracting, it causes you to lose focus and it ulitmately slows you down (or worse). Tracking and planning your expenses is having your eyes on the road and both hands on the wheel. Seeing where you're going is a lot less stressful.
Bottom line? A goal is where you're trying to go. A spending plan is the shortest path there. If you don't have a goal, make one. If plotting your progress toward it isn't enough to keep you engaged, then create a goal that does. When you review your expenses, think about the things you spend on money on that aren't all that important to you. Drop them. Think about the things that are. Find ways to have them for less. Expect setbacks, because you're going to have them. And remember, anyone can do anything for a short stretch. Winners are people who keep showing up.
In my experience there are two kinds of people in the world: those who look rich and those who are rich. If you'd rather be in the latter category than the former, plan. It's really just that simple.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.