I don’t know if you really need a budget, but I do know that a budget can be an extremely helpful tool for most people. Most people never set one up or have any clue what they spend money on. They may think that they do, but they have no idea where their money is really going. It’s so easy to spend without thinking or to tell yourself that “it’s just this one time” or it’s “just a little more than I wanted to spend”. But those “one-time things” and “just-a-little-mores” can add up quickly when they become a habit.
At my job, I come across a lot of people who want to retire but have no idea how much money they need to live on. Not even a ballpark idea. They’ve just lived their life spending and saving without really knowing how much they do of either. I think that most people can adjust to the amount of money that they have available to spend, but sometimes what I estimate they’re spending now and what they’re going to be able to spend in retirement are miles apart. This could be a huge shock when it comes time for them to adjust their lifestyle and start living on much less.
This is one reason why I think it’s important to budget.
Budgeting for Singles
Over the past couple of years, I haven’t been as good at maintaining a budget and tracking my expenses as I would have liked to. It’s hard. It’s time consuming. It’s not the most fun thing to do. Sometimes it can feel too restrictive. Trust me, I get it.
When you’re single, I think that you can get away without having a budget, if you’re frugal and spend wisely. Unfortunately, most young, single people don’t fall into that category. Over the past couple of years, I haven’t used a very strict budget and I was able to save 27% of my income in 2017 and 25% in 2018. I just lived by the principles of frugality and spending wisely. So, I do think that there are people who can get by without budgeting and will be fine in the long-run, but I don’t think there are too many people who are as big of natural savers as I am.
Would I have been able to save more if I had used a budget and been stricter? Absolutely. But personal finance is a balance between living for today and saving for the future. I feel like I’ve done a pretty good job doing both.
Budgeting for Couples
I do think it becomes much more important to use a budget and track spending when there are multiple people involved. There are so many more things going on when there are two people and probably twice the amount of transactions to keep track of. This is especially important if you have separate bank accounts or separate credit cards that you use – it’s good to have all of that information in one place.
A “couple’s budget” not only allows you to have a good idea of where your money goes and who needs money to spend on what each month, but it can also help to keep each other accountable and make decisions as a team about what you want your money to do for you and where it should be allocated.
For those who are married, in a serious relationship where your income is viewed as joint, or who are engaged and will be combining incomes soon, I urge you to sit down and write out a budget. No, it’s not the most fun thing to do, but it will pay off immensely over the long-run. We always hear that money is one of the biggest reasons for divorce in America. Why wouldn’t you be proactive about making sure that doesn’t happen?
Progress, Not Perfect
If you’re not doing any sort of budgeting or expense tracking, then you don’t need to immediately go all in. Whatever you do doesn’t have to be perfect, just do something to make progress. Start with some easy steps and progress from there.
You could start by just keeping track of your spending for a month, evaluate where you felt you spent too much, and then work on it the next month. From there, you could implement a simple budget like the 53/30/20 rule where your after-tax income is allocated 50% to be spent on needs, 30% to be spent on wants, and 20% to be saved. Beyond that, you can use tools such as EveryDollar, Tiller Money, or YNAB. Making things more difficult usually isn’t the right answer because it’s intimidating and mentally fatiguing.
You’re gonna suck at it at first, it’s not going to be easy, and you’ll probably blow completely through what you thought was a realistic spending plan and not meet your savings goals. Don’t let that deter you. Use it as a tool to see where your money goes, evaluate if that’s where you really want it to go and if that’s what really makes you happy, and assess if your current spending is helping you reach your goals.
There are so many things that you want to accomplish and a lot of them probably require money. It’s your choice – you can be intentional and proactive with your resources to make sure that you reach your goals, or you can live life and hope that everything works out.
A little bit of discipline can go a long way.
