“Save first, spend later” plan has not been working so well. Money habits that have worked for years can lose their effectiveness. Time to consider the b-word?
I’ve always hated the b-word and have avoided it at all costs. The personal finance b-word, that is. Budget.
Whenever someone asks for my approach to budgeting, I tend to reply with an opinioned monologue about how a budget isn’t really necessary if you have a disciplined plan.
The gist is this: If you are in the fortunate position to have enough earnings to hit all your savings goals and cover your expenses, who cares if you spend your last pre-payday dollars on a latte?
It works well for people without the desire or discipline to track each and every expense. Most Americans fall in this group. Only two in five have a budget — a number that’s held steady since 2007 according to the National Foundation for Credit Counseling’s 2014 Consumer Financial Literacy Survey. Of course you have to pay yourself first for this to work.
We’ve been operating on the save first, spend later plan for years. Recently, it’s not been working well.
My smug set-it-and-forget-it “un-budget” is beginning to feel like an excuse for our negligence, not a tried-and-true philosophy.
You’d think that months after a couple of salary increases and paying our last day care bill our bank account would be larger than before. Nope. Where did the money we planned to shift toward college savings go? Why did I have to cover last month’s credit card bill with money set aside for something else? What’s to blame for our newfound spendthriftiness?
As in life, sometimes money habits that have served us well for years lose their effectiveness.
It’s time to regain control.
Spend, track, repeat
Unfortunately, any budget reboot requires taking a magnifying glass to our spending.
The delicious breakfast sandwich I’m eating while writing this is definitely part of the problem. I know without number-crunching that the amount we spend on food — both at home and in restaurants — has risen steadily over the years. But we can’t rely on gut checks alone to determine our money leaks.
This is where it gets complicated. There are numerous tools for spending analysis on the market. Most banks offer online personal financial management tools of varying sophistication levels. In a nutshell, these tools track and categorize your spending. Some even project the amount of money you should have in the near-term based on past patterns.
If your bank tool isn’t to your liking, there are fairly inexpensive budgeting plans such as Mvelopes.com or You Need A Budget. Mvelopes is a 21st-century version of Grandma’s envelope-based budgeting system. You Need a Budget is praised for training us to live on the money we earned last month, not the money we hope to earn in the future. Mvelopes Premier costs $95, although there’s a free version with fewer features. You Need a Budget will run you $60 annually.
High-tech or ballpoint pen
Looking for a free, or cheaper option? There’s no shortage of money apps available that promise pain-free budgeting. A quick Google Play Store search yielded too many apps to count.
I have to admit that part of me is resistant to yet another app on my phone. I download many free apps designed to improve my life but rarely crack them open.
I could try the old-school method of writing down every expense for a month. But I know how bad I am at tracking my food intake this way. Why would money be any different?