Wednesday, March 13, 2013

Why We...Budget

From Alan Cleaver at Flickr's Creative Commons
Do your eyes glaze over when an online personal finance personality suggests a making a monthly budget?  Do you envision a life of sacrifice and suffering, mending torn clothing with a needle and thread, and eating the meager harvests of your local dumpster?  Or, worse, do you think you'll turn into a miserly grump who would rather count his nickels than spend them on his loved ones?  If you do, it's likely there are some emotions at work.  Namely, fear:  fear of the unknown if you don't know how to budget.  There may be fear that you simply don't have enough money, and making a budget may drag that depressing truth into the light of day.  Or fear of failure, especially if you've tried to budget before and have failed to stick to it...maybe failed repeatedly.

A good way to face your fear of budgeting is with graded exposure: when you repeatedly face your fear via small steps.  Instead of trying to make a yearly or monthly budget, set a budget for tomorrow only.  Then do it again tomorrow.  And again.  In time, your fear is conquered because you overcome a small piece of it every day.

Beyond fear, there is usually some procrastination at work.  If I knew how to conquer procrastination, I would write more.  But there are good approaches from very smart people available.

How to Budget
What's the best way to budget?  The best budget is the one you use.  I've been updating the same Excel spreadsheet for years.  Every once in a while we make a small change but, for the most part, the process is always the same.  Before the start of the next month, we type in all the money we are going to make in one spot, type in what we're going to spend on groceries and gas in some other spots, and as the month goes on, we type in what we actually spent.  When we overspend by $20 in one spot, well, $20 has to come from another.

But that's just us. I don't particularly care if my friend uses a spreadsheet or an envelope system or a bunch of mason long he actually uses the system, instead of just talking about it.  The key, as with a lot of things, is to start.  As in, if you don't currently have a budget, download this file I created, special, for you.  Like, right now.  Do it.

Okay, if you don't want to use my form, Dave Ramsey has some that work well.  I like Gail Vaz Oxlade's jar system even better, but that may be because her motherly, Canadian personality is so much more pleasant than Dave's.  A lot of people like Mint, if you can get over the idea of sharing your most sensitive passwords online.

The system you use really doesn't matter. At its best, a budget is an organizational system that allows for a healthier, less emotional relationship with your money, and causes you to do good things, like save for a child's college education without making draconian cuts to the family lifestyle.  But budgets, as an example of organization or innovation, are pretty lame.  They're just dumb spreadsheets or some mason jars on the kitchen counter.  It's their benefits that are impressive.  To borrow from Ramsey, they make your money go where you tell it to.  And that's cool.

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