Budgeting isn’t reserved for a certain class of citizens. Absolutely everyone needs a budget, even you. You are never too poor or too rich to budget. Quite often I hear people use that as an excuse. I’ve actually had people tell me that they are too poor to budget while others tell me that they don’t worry about money because they have “enough”. The truth is that everyone needs a budget. And I mean everyone, even the ridiculously wealthy have budgets.
Everyone Needs a Budget
Here’s the thing about money. It doesn’t discriminate. Money is spent whether you are rich or poor. You need a budget regardless of your socioeconomic status. Otherwise, how do you even know if what you are spending is too much?
It’s shocking to me how many people admit to me that they don’t use a budget. One of the perks of writing a personal finance blog is that people talk to me about money often. Everyone feels comfortable talking to me about money. While I love talking about money, it makes me sad when people I love tell me that they don’t budget. It makes me even sadder when they tell me that being nervous about money is the number one reason they don’t budget.
Let me tell you a secret about budgeting: it actually makes you less stressed about money! It’s true! When you are ready to budget, check out this post.
Why do I need a budget?
Do you find yourself asking, “why do I need a budget?” You need a budget to accurately know where you are spending your money. You probably think you know, but you don’t know for sure until you look through your spending habits and create a budget.
When you create a budget you tell your money where to go instead of your money telling you what to do. Dave Ramsey has an even better quote: A budget is telling your money what to do instead of wondering where it went.
There are people of all socioeconomic statuses who don’t budget. Those same people wonder where their money went.
You’re never too broke to budget
I’ve been working on budgets a lot lately. With my mom sick, I’ve been trying to help her figure out her finances while she isn’t working. The logical first step was to make a budget.
Handling a loved ones finances isn’t easy. I’m slowly learning that just because I like to talk about money, doesn’t mean everyone in my family enjoys it. Like most people, my family gets anxious talking about finances. And like most families, we tend to get a little snippy with each other when we don’t see eye to eye. So when I told my sister we needed a budget, her response was, “I don’t see why we need a budget to know that we don’t have any money”.
I wanted to scream. About 3 minutes later I did scream, but that is another story.
No one is ever too broke to budget. Ever.
Reviewing your spending habits lets you get a clear idea of what you are spending each month. From there you can cut out excess purchases or budget for something else, like savings.
You’re never too rich to budget
I have a favorite story about a “rich” couple who failed to budget. Is it strange to have a favorite story on this topic? Probably.
Anyhow, this couple was ready to retire so they visited a financial planner. They had high paying jobs and had worked for a long time. This couple had lived a very beautiful life. They had kids, traveled well, had a ginormous home, and fancy cars. They had just one problem: they were rich but had no money.
Everything can be bought on credit. Just like millions of Americans, this couple owed more than they saved. Something as simple as budgeting the amount of money coming in versus the amount of money going out could have helped this couple enjoy retirement.
I’m not the type of personal finance writer who is against credit cards or financing houses and cars. However, if you choose to do that, only finance what you can actually afford to pay off before you retire. A beautiful home with a huge mortgage is only worth it if you can budget well enough to pay the mortgage and save for the future.
Truly wealthy people budget their money
Have you ever heard that there is a difference between rich and wealthy? Wealthy people tend to be more responsible with their money, use it to make more money, and have true financial freedom. Rich people only make large sums of money each paycheck.
What about the obscenely rich people? Well, they budget too. The only difference is they probably pay people to budget for them. I’m not even joking! Obscenely rich people don’t get that rich by accident. They manage it well and then they pay people to manage their money for them. I guarantee you that all wealthy people budget their money.
Save first, then budget the rest
One of the biggest misconceptions about budgeting is that you save what is left after spending. That is all wrong! You spend what is left after saving. In order to do this you should budget for all your fixed expenses first (loans, rent/ mortgage, utilities, gas, etc), then add savings into your fixed expenses. Every month consider your savings account to be something that must be paid. Think of it just like a bill.
After all fixed expenses have been paid, you can spend what is left. Or put it into savings too! A vacation savings account sounds a lot smarter than paying for one on a credit card, right?
What you need to know about budgeting
When I talk to people about budgeting I almost always hear the same concerns: budgeting is scary, sticking to a budget is too hard, and money isn’t really stressful enough to budget. Listen up reader, those concerns are malarkey.
The bottom line is that not budgeting is scarier and more stressful than just doing it! Here are my thoughts on those hogwash concerns you might be having.
Budgeting is not scary
The simple act of budgeting is not scary at all. It’s so incredibly simple that it’s laughable and will probably only take you an hour or two. Learn how to create a Google Spreadsheets budget here.
The scary part of budgeting is what comes first: analyzing your spending habits. Before you budget you absolutely must look through your spending habits and get an idea of what you need to put in your budget as well as how much money should go to each category. Seeing exactly how much you spend on frivolous items each month truly is the scary part of budgeting. No one really wants to know how much they spent on Starbucks each month. But you need to know.
You don’t have to stick to your budget
Here is a crazy concept: just because you have a budget doesn’t mean you have to stick to it.
I think the pressure of sticking to a budget each month is one of the main reasons people don’t budget. Imagine taking that pressure away for a minute. Creating a budget doesn’t mean it’s set in stone. Should you stick to it, probably. However the world will not implode if you don’t.
Go ahead and make that budget. Stick to it when you can and don’t freak out if you don’t. We all reach road blocks from time to time. Pick yourself up and do better next month.
I don’t worry about money. Why do I need a budget if I don’t worry about it?
The sweet and simple answer is that just because you don’t worry about money right now, doesn’t mean you will never worry about money.
What harm can it do to make a budget?
I’ve been there with you. In fact, sometimes we don’t budget very well. Sometimes we have a loose budget in our head that helps us keep tabs on how much we’ve spent. What never fails for us is sticking to our savings budget. As long as we save first, we have money left over to spend. Then what we don’t spend can also go in savings.
Ready to budget? Get started here.
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