Nobody likes talking about the dreaded “B word.” Just mention the word budgeting in a crowd, and you’ll see perfectly reasonable adults turn into petulant children. After giving you an angry stare, they’ll cross their arms, give you the side-eye, and breathe deeply until the moment passes.
Why? Because even responsible and hard-working adults hate the idea of budgeting or planning their spending. They work hard each week, they’ll say, and they don’t want to live life in a cage. And when you mention the fact that you budget, people can see it as a personal attack. If you’re budgeting, after all, that probably means you think they should be, too.
And just like that, your thoughts on budgeting get swept under the rug. Your success is their failure, and deep down, they absolutely hate it.
And trust me, I totally get it.
But after years of budgeting and even authoring a book on the topic, I now hold the belief that most people don’t understand what budgeting is, or what it can accomplish. In the real world, a budget doesn’t have to be restrictive at all, nor does it bar you from buying the things you really want. It simply guides your spending toward your biggest priorities. In fact, once you get the hang of it, budgeting can buy you more freedom than you ever dreamed!
If you don’t believe me, ask anyone who budgets what it has done for their finances. Chances are, you’ll find people who used a budget to get out of debt, people who retired early due to a faithful budgeting and spending plan, and families who reached their financial goals thanks to one amazing tool – their monthly budget.
Or, you can always hang on the sidelines and waste thousands of dollars per year instead. Because when you don’t have a budget, it’s much, much harder to get your dollars to align with your dreams.
If you’re on the fence about budgeting, here are five ways not having a budget makes it way harder to get ahead financially:
When you don’t have a budget, getting into debt is a piece of cake.
As of 2015, the average credit card debt among indebted households was $15,609. While much of this can be attributed to extreme circumstances like job loss or medical bills, we can also blame it on the fact that most people spend freely and willingly without a plan. And most of the time, that kind of spending leads people straight into debt.
When you don’t have a budget, it’s far too easy to spend more than what is reasonable – or even more than you bring home each week. And once the debt spiral takes hold and you start paying interest, it becomes even harder to dig your way out.
Without a budget, surprise expenses can throw you off track.
When you create a written budget every month and track your expenses diligently, a “surprise bill” like your bi-annual car insurance premiums or your tax bill can’t possibly throw you off track. Why? Because you knew it was coming and included it in your budget already.
That’s how budgeting works: Instead of letting the chips fall where they may, you prepare your finances ahead of time.
When you’re flying blind without a budget, on the other hand, it might be difficult to remember which bills are due and when. If a surprise bill just so happens to hit when your account runs low, well, you’re automatically behind for the month, or forced to tap your emergency fund or even go into debt for something you should have seen coming.
Without a budget, you have no idea how much you could be saving.
While this one isn’t as obvious, it’s just as important. When you don’t use a budget or track your spending, you have no idea how much money you might be able to save if you would just try.
You’re not only missing out on potential savings — there’s an opportunity cost here as well. If you could just save an extra $100, $200, or even $500 per month, for example, you might be able to invest and grow richer, become debt-free for good, or save up the cash to launch a life-changing business idea.
Often, it’s the expenses we don’t think about that stand between us and our goals. It’s quite possible your car payment is the reason you’re not saving for college, for example. Or perhaps your daily restaurant lunch is the reason you can’t afford a family vacation this year.
Whatever it is, budgeting forces you to accept your spending choices at face value. And when you avoid budgeting, you avoid that confrontation altogether.
When you don’t plan your spending, you waste money.
When you don’t have a budget, it’s far too easy to spend much more than you dreamed. If you don’t tell your money where to go, it will find a place to be spent. This is especially true when it comes to regular spending on consumable stuff like food, entertainment, and convenience items. A lot of times, a handful of bad habits can cost you hundreds of dollars each month.
Here’s a good example: When my husband and I started budgeting and tracking our spending in 2009, we found we were blowing more than $1,000 per month on food for two people! That was a tough pill to swallow, but we turned around our situation rather quickly. Because we starting using a written monthly budget, we were forced to confront our spending and change our ways.
When you don’t have a spending plan, it’s much more difficult to reach your goals.
Not saving enough to reach your goals? Whether you want a retirement nest egg, a fully-stocked emergency fund, or some fun money to spend however you want, a monthly budget is the best way to make that happen.
When you rely on a written budget, you force yourself to look at your recurring bills in a brand new way. As a result, you’re much more likely to “cut the fat” from your spending and divert those dollars toward the things you really want.
After examining your spending, instead of continuing to fork over $200 for your cable bill, you might decide to use those funds to pay down debt. And instead of buying a new car and taking on brand new $500 monthly payment, you might keep driving your older car for a little bit longer — enough to pay for a family vacation this year.
The bottom line is, budgeting brings all of these issues to the table, and forces you to spend according to your values.
If just the thought of budgeting makes you feel grumpy, try thinking about it in a brand new way. Instead of seeing budgeting as a set of self-imposed restrictions, think of all you could gain instead.
We all have financial goals we want to achieve someday. Maybe you want to retire early, dream of paying for your child’s college tuition, or simply want to stop stressing over money every month.
Either way, budgeting is the best way to make your dreams come true. And no matter how much you hate the idea, no amount of shrugs or eye rolls can change that fact.
Do you create a budget or plan your spending every month? Why or why not?