Some people may relate better to “track your spending” instead of “budget”.
There is a difference, but if you’re not budgeting or tracking your spending in any way at all right now, do it. The very first step is to start tracking it in some fashion. It will surprise you.
The short answer to the question, “Why did we start setting a budget each month?” is because we’ve got aggressive financial goals. Our financial goals are both short and long-term and we want to do everything we can to meet them.
Chris and I thought we had a good idea where our money was going each month until we actually started really paying attention. I don’t mean scroll through your credit card statement before you pay the bill, paying attention.
We thought we knew about how much we were spending on what… and we were oh so very wrong.
There’s a very big difference between seeing separate transactions, each for a reasonable amount, and combining all the transactions and costs for one “category” into one giant number.
It’ll surprise the heck out of you, I promise.
I’ve said it twice now because it’s true.
If you’re reading this and thinking, “I don’t have aggressive financial goals” or “We’re doing just fine how we are now” or “I make plenty of money so I don’t need a budget”, I’m here to tell you, erroneous on all accounts!
We don’t budget to restrict ourselves or decide what things we can and can’t have or do.
We budget to be more conscious of our spending. We’re very fortunate to have/had good jobs with a good income (and we work very hard).
BUT, that doesn’t mean we should be frivolous with the money we work so hard to make.
Once you realize where all of your money is going, you’ll make smarter decisions, whether consciously or not.
I think it’s similar to snacking. If I walk by a bowl of M&Ms the chance of me grabbing a few and mindlessly popping them into my mouth is astronomically high (and the chance of me repeating that 13 times a day is also very, very high).
However, if they weren’t sitting there in plain sight and within reach, there’s practically a zero percent chance I would have gone and sought out M&Ms to eat.
I didn’t actually want the M&M’s, but they were there and easy to get to and tasted good for about 3 seconds.
If I were trying to lose a few pounds, I would think twice before popping a handful of M&Ms into my mouth. I still may do it in the end, and that’s ok, but I’ll at least think about it and make a conscious decision.
It won’t be
Setting and following a budget each month is similar. Getting gas is clearly a necessity so you don’t break down on the side of the road.
Running into the store to grab a drink or snack is easy. Did you really need or want that snack? Maybe. Or maybe not. My guess is the latter. It was just there and cheap and easy and automatic.
The same questions go for “impulse buys” near the registers of stores.
Or the four bags of things you walk out of Target with when all needed was toilet paper.
You get the idea…
Intentional vs Unintentional
There’s a difference between wanting something and needing it, and there’s a difference between mindful spending and mindless spending.
You can still buy things you want and don’t necessarily need when you have a budget.
Budgeting just makes you more mindful of your spending so your money goes exactly where you want it to go.
This is helpful no matter how big or small your financial goals are, whether you want to go out for a nice dinner next week, go on an amazing multi-week tropical vacation next winter, or pay cash for your car or house.
Yes, cash, as in not having a car or mortgage payment.
Is it really possible to be totally debt-free?
There are few people who are legitimately debt-free.
Don’t even have a mortgage debt-free.
Those who are 100% debt-free didn’t get there by spending willy-nilly and not paying any attention to where their money goes.
Take a second and think about how different your life would be if you didn’t have a car payment or rent/mortgage payment each month.
Let that marinate. That’d be pretty freaking fantastic, right?!
That same train of thought can be applied to any and all debt. Student loans, credit card bills, medical bills, the roof you just had to replace, the couch you bought last month, the list goes on and on.
Budgets are cool, and they are for everyone
If you have any debt whatsoever, you should have a budget.
If you don’t have any debt but plan on making any purchase at all ever again, you should have a budget.
If you have money coming in and going out in any capacity, you should have a budget.
Are you beginning to see how I feel about this topic??
I know there some who will read this and think, “I should give this a try”. There are others who will think I’m completely out to lunch, that it’s way too much work, and they just don’t need it.
Everyone’s situation is different. There is no one-size-fits-all answer for everyone.
However, I am a firm believer that you should try something for yourself, and see how it fits into your life before you write it off.
Do you really know where all your money goes each week or month? Are you actively trying to pay down debt or save for a goal? Do you already have a budget you follow?