Could it be true? Does budgeting not really work? Do I really need a budget to do well financially?
Well, those are some questions that I’ve seen around the web lately. I’ve probably seen them because I’ve been out reading other people’s blogs about budgeting and frugality lately. Yet still, people are out there writing that maybe budgeting doesn’t work.
Some of their arguments are that 1) budgets actually train you to spend the same amount of money each month, whereas, you should be starting over and looking at each expense as if it were new (this is actually a form of budgeting called zero based budgeting); 2) that budgets are like diets and that once they are broken (which often happens when they are unrealistic) the whole budget is blown and spending goes back to where it used to be; and 3) people justify things in their budget that are unrealistic and they therefore don’t cut their spending as they should because they have used their budget to justify their spending.
Well, there is merit to all of these claims. In fact, there are lots of problems that cause budgets not work. My top three reasons that budgets don’t work are 1) that the person creating it is not disciplined or dedicated enough to follow through, 2) that the budget is unrealistic, and 3) that the budget is poorly put together and is missing many key components that really help you analyze your spending.
According to David Ning at Wisebread.com, budgets just don’t work for many people. According to him you should try to lower your spending without starting a budget by heeding the follwing advice:
Start From Scratch
This isn’t easy for some people, as you can imagine, but eliminating almost all of your expenses and starting from scratch will help. What I mean is to treat every bill, every meal out, and all your automatic payments as expenses that you truly cannot afford. Once you scrutinize every detail of what you pay, you will find that part of your spending is on things you don’t really care about, and you can start reducing.
Pay Yourself First, and Pretend You Have Less
The fastest way to spend less is to have less. When you have less to spend money with, you will find a way to survive. We obviously don’t want to voluntarily decrease our income, so the closest thing we can do is pay ourselves first and then pretend we have less. That’s why we should schedule our deposits to our retirement accounts the day we get our paychecks and to increase our savings amount every time we get a raise. If we don’t get a chance to use it, we probably won’t.
Pay Off Debt
Another way to lower your spending is to think of ways to work on your debt payments. From refinancing to moving debt around to lower your interest rate, there are many ways to reduce your debt in order to lower your monthly obligations. Don’t forget about this side of the equation, because spending some time here can reap huge rewards.
You can find the rest of this blog post at http://www.wisebread.com/how-to-spend-less-without-starting-a-budget.
I have to say, I can see both sides of this argument. Personally, I think budgets work, but I don’t think that they work for everyone. That’s just because people operate so very differently. While one person is extremely well organized financially and tries to do all the right things by focusing on their spending, another person could be just as successful that doesn’t focus on spending or budgeting, but that spends time increasing their income so that they can also get ahead financially. There are many ways to improve your finances. Budgeting is simply a tool that some people find useful when trying to improve their own finances.
So, the answer is, “no”, you don’t need a budget. However, budgets do work.
Have any comments to add about whether or not budgeting has worked for you?