One of the very first things people talk about when taking control of their finances is the crazy B-word: Budgeting. And for the most part, budgeting your cash is pretty sound advice. Keeping track of where your dollars go is a great way of getting a grasp on your overall financial health. You’re more likely to know how much you spend, what area of your life is taking up the most cash, and you’ll probably get a lesson about your own spending psychology. All around, pretty good stuff.
However, budgeting is NOT necessary for everyone. If you need a complete financial makeover (no shame, girl–just start taking action), you need a budget. If you generally end up with a few bucks at the end of each month, you can certainly do without one.
And frankly, I hate budgets. I always forget to budget something (wedding gifts, anyone?), have to re-arrange receipts to fit categories (if I picked up food and clothes at Target, how do I fit this bill in the budget categories?), and it’s just plain boring.
I can say with honest conviction, and true know-how that I hate budgets, because I had to use one for a few years.
Not so long ago, I didn’t make very much money. While I could cover my living expenses, I had to budget nearly every dollar I had. At that particular time in my life, I NEEDED a budget. My dollars-in, dollars-out was so tight that I had to make sure not to overdraw.
During that time, I used Mint.com–the online budgeting service that tracks your spending in real-time. I logged in daily to check my progress, and it was very helpful in keeping me on track.
Instead of tracking my SPENDING, I diligently track my SAVING. My theory? Once I’ve saved for my big goals like retirement and a house down-payment, I can spend the rest 100% guilt free.
For an illustration of why this works, compare budgeting to dieting. If you need to lose weight, it’s in your benefit to track your calories in and calories out. That’s a key indicator in your success. If, however, you are a normal, healthy, active person; tracking your calories is a waste of time. Instead of needing calorie information to make your good decisions, you have likely formed habits that keep you in check.
To my mind, this is the same for budgeting. If you are unable to pay your bills, have a lot of high-interest debt, or have patterns of overspending, you’ll benefit a TON by budgeting your cash (try Mint.com or the anti-budget in my 7-day mini e-mail program). If, instead, you have a couple of financial “problem areas,” try a savings-focused budget.
Here’s a quick and easy way to set up a saving-focused budget.
To make sure you pay yourself first, decide what percentage of your paycheck you’ll put toward each account
- Start by saving at least 10% in your regular bank savings account. This will set you up with an “Oh Sh*t Fund” for unexpected bills, as well as any other savings goals like a wedding, a car, or a chic trip to Paris.
- If your employer has a 401(k) program, contribute up to the match (it’s free money–don’t let it get away!)
- Put everything else in checking and live your damn life
- If you have anything leftover at the end of the month, add it to your savings account or pay down any big debts you have.
Have your employer to set up automated deposits into each account.
Most companies will distribute your income across any number accounts you could dream of! Make them do the work for you so you’re not always wondering whether or not you made the right transfers.
If, of course, you just love budgeting–HAVE AT IT! What works for me might not work for you.
Keep going for your dreams, ladies. If you hate budgeting like me, try out this savings-focused “budget” technique instead and let me know what you think!