The Benefits of Having a Budget

I've interacted with so many people recently about money and finances. Since I've started this journey and been more vocal about my financial goals I've had input from all sides:

"Budgets aren't needed if you focus on making more money."

"I don't want to create a budget because I'm afraid of what I'm going to find."

"I don't see the point of a budget, everyone has debt and it's just a part of life."

Truth be told I'm not surprised at these reactions. The topic of money has evolved into something absolutely insane. If it's on social media it's about how you can get the most amount of it the fastest, or how this secret to getting rich is better than this secret, or how your falling behind if you don't have goals of being a millionaire. If it's from your family you've got their habits with money, good or bad.

If more people reflected inward about what they wanted out of life and then tailored their goals around that, money would be a lot less of a burden for a lot more people.

The pain of not having a budget

Before I took my finances seriously I remember always having this nagging feeling like something bad was about to happen. My suspicions were always proved right when something bad did happen and I didn't have the money to get out of it. What did I do in those situations? The same thing that everyone else does...credit cards.

Before I knew it the cost of living life and trying to impress people with stuff I didn't need got way out of hand. When I finally woke up and realized how bad it was I didn't know how I got there.

The only thing I knew about money at that time was whatever my parents had taught me and trust me...it wasn't a lot.

I didn't know where all of my money was going. I knew roughly how much I was bringing home and just thought "yeah this sounds like enough to cover my bills I should be fine." I had no idea how much I was paying for necessities, fun stuff, when bills were due, how that laid out with my payday...nothing!

It was early 2015 when I knew I'd had enough. I wanted to start taking my finances seriously but there was just one problem...

I had no idea where to start.

Finding a budget that works FOR ME

When I tell you I've tried all of the different budgeting software...trust me I mean it. For the last 10+ years I've been jumping back and forth between all of the ones you can think of.

Dave, YNAB (You Need A Budget), Mint (RIP), Envelopes, Rocket Money, Copilot, Every Dollar, Quicken, Goodbudget, Pocketguard...

None of them worked.

I don't know what it was about them but for some reason I always saw one fatal flaw. Whether it be the way that it asked me to record transactions, giving every dollar a job, carrying leftover money into next month, or whatever the special sauce was for that app...I couldn't stick with it. I was beginning to run out of hope. Then I decided to go back to basics.

I opened up Excel (eventually moving to Google Sheets for the better mobile experience) and started fresh. Made a total for my monthly income, listed out my bills and added them up, then subtracted them from my income. Voila...a budget.

At it's most basic form this is all I needed at the time. It gave me a sense of everything and oddly enough, the amount of relief I got from seeing this was more than I expected. Don't get me wrong, what my budget looked like sucked but at least I knew where I was.

As the next 6-7 years went on I adapted and updated my budget to suite my needs with whatever life threw at me. Change of job, change in pay structure, going from biweekly to bimonthly (twice a month not every two months), getting married and sharing bills, getting divorced and not sharing bills...all of it. It was the easiest mechanism I found that I could stick with. As simple as this sounds...

It worked FOR ME. That's the important part. I encourage each and every one of you to find whatever tool works for you to manage your finances. It could be one of the apps I mentioned above that resonates with you or a new one that I haven't tried yet. Try out all different kinds of them and if you find something you don't like, move on and try another one. The beauty of it is most of them are free!

The point...

...of this post is to go over the benefits of having a budget. I believe if you're serious about taking control of your finances you MUST have a budget. Anyone that doesn't have a budget or tells you that you don't need one is blissfully ignorant of how bad it is for them or they have so much money they don't need to worry about running out. I'm going to guess it's the first one and not the second.

1 - Insight into the big picture

Once you see things WRITTEN out on paper, in a spreadsheet, on envelopes, whatever, it changes things. Whether it's worse or better than what you thought now you see it. Arguably the hardest part is over. From here, you can make a plan to move forward.

2 - Peace of Mind

Ever since I found a budgeting tool that works for me it's removed virtually all of my stress associated with money. Don't get me wrong, there are days or weeks when things get tight. I might need to replace the tires on my truck, shell out $5,000 for a move, pay an unexpected medical bill, whatever it may be. But overall I've gotten so much peace of mind since having a budget that works for me even though I'm not where I want to be financially.

3 - Ability to Plan

We all have financial goals and unless you have a sense of the money coming in and out how can you plan for the financial goals you have? How do you know how much money you can put towards savings for a car? Getting out of credit card debt? A vacation to the Maldives? Simple answer...you can't.

4 - Tracking Your Progress

Similar to the benefit of being able to plan, tracking progress with a budget is just as important. Once you have a budget how will you know when you've gotten to where you want to go? Most budgeting software allows you to set goals that you want to achieve...TAKE ADVANTAGE OF IT. Even if you're using a spreadsheet like me you can just add a column and in each row put the date you add money to the goal and keep a running total. It's that simple.

TLDR: Having a budget is a MUST when working to get a hold of your finances. It gives you peace of mind, the ability to track progress towards your goals and plan for the future. You don't need much more reason than that to start a budget today.

Good luck and talk to you in the next one!

Cheers