And I don’t mean sharing ice cream and I don’t mean little sisters…..I mean family budgets……
“Budgeting”, “tracking expenses”, “generally trying to figure out where the money goes”, whatever you want to call it…….everybody feels it should be important but it perpetually rides the to do list. Or else budgeting for some reason suddenly becomes relevant or timely, is committed to, and then quickly fades as a priority. It’s kind of like that old acquaintance you see at soccer jamborees every 6 months and each time recommit to “getting the families together” but it never happens (we’re not thinking of anyone specific here, just an analogy, we promise…).
But looked at through a slightly different lens – budgeting’s great. Here’s what we’re talking about:
5 reasons why budgets suck:
- They’re a huge time suck – Who has the time to look through old bank and credit card statements or religiously track spending day in and day out to try to get an accurate picture?
- We fear the result – At some level we all fear what the exercise might reveal so we avoid it like the plague.
- It’s an admission we aren’t in control – The need for budgeting seems like an admission that we’ve been doing something wrong or clearly suffer from total lack of discipline.
- There’s no point because we make so much money – Why bother if we’re in surplus and don’t spend all the money we make – we’re already saving.
- It only ever leads to fights – Talking about who spends what, where and why? Just go make your bed on the sofa right now.
5 reasons why budgets are great:
- They save you time – Sure, a little time up front getting organized but after that, you’ll spend WAY less time worrying about this because you’ll be in control.
- They liberate you from fear – The bottom line is that the only way to build wealth is to save more than you spend and to invest the surplus wisely. Awareness and knowledge wipe away the fear and make more transparent the things that actually matter.
- They put you in control – Nobody’s perfect, but the only way to be in control is first to build awareness. If you need to change something, you have to be aware and in control first.
- It will allow you to maximize your wealth growth – First of all, you may not always be in a surplus situation and second of all, awareness will allow you to spend more on what you care about, less on what you don’t – most wealthy people got wealthy via this sort of discipline, not by some get rich quick cash windfall or by hitting a home run with their investments.
- It leads to less fighting – Agree to start with a no shame no blame approach, get down to the stuff you agree is important and pretty soon you’ll be celebrating the extra savings or better allocation to what’s really important.
So what do you do?
So funnily enough the 5 reasons we list why budgets are great are actually the same 5 reasons they suck, just with a slight change of perspective and maybe a little upfront time investment. The investment is worth it. You can use the Canadian version of mint.com or Quicken from Intuit to help reduce the time it takes – these programs allow you to link with your existing bank and credit card accounts, categorize your spending and track things properly. We’re currently taking a 30 day free trial of the software from youneedabudget.com. It’s definitely more manual than mint.com or Quicken but we think that’s a good thing – it really makes you focus on things and think about them more thoroughly.
The evolution from why they suck to why they’re great should go something like this:
Budgeting > Tracking Spending > Awareness > Control > Change > Confidence
First try to lay out your best guess at what you spend month to month by category (fixed monthly expenses, monthly bills on necessities, discretionary spending, monthly savings for big annual expenses, etc). Then track your actual spend over the next 2-3 months – I think you’ll find some surprises – the picture may not be pretty but the awareness will deliver relief and a feeling that you’re finally in control. Once you’re in control you can tinker and make changes, especially where you see out-sized spending on things that don’t really make you happy. Remember the only reason to do this is to a make you happy – to tie your financial situation to things you care about. Control and the ability to make change will increase your confidence that you are taking steps to make sure you’re getting what you desire.
And that makes you feel good – kind of like sharing ice cream and little sisters.