The Benefits of Budgeting

[kork13]

For many people around here, the practice of building, following, and maintaining a budget has become a fairly simple, natural habit. That's not the case for much (if not most) of America. So what do you see as the benefits of following a budget?


This topic came up for me because of the current budget fight in D.C. -- as a military member, the PTB (powers that be) are starting to get the word out & prepare us for the possibility of us not receiving our mid-month paycheck as usual if the budget lunacy carries on beyond 1 October. (I don't want to talk about the politics of this... I only bring it up as background.)

Anyway, I was thinking about what that would mean for me -- basically, I would need to pull some money out of my savings to cover my monthly-billed expenses for the month. My first thought: "Oh, that's easy. I've got the money in my EF, and I know how much I spend each month, so I would only need to pull out about $3000 to cover the month's expenses." After a minute, I realized how grateful I am that I know how much I actually spend! And not only that, but thanks to following my budget, I've managed to save up a healthy EF and other funds that I have access to as needed. I've always seen an emergency fund as the important & necessary part of being prepared for the unexpected. But this line of thought also led me to realize that having a budget & knowing exactly how much you normally spend each month is also an important part of financial preparedness -- I know what I spend, how I spend it, and how I can modify that if necessary. That realization was surprisingly comforting & reassuring for me.

[ReiMichiko]

Thanks for putting that one in perspective. I never really looked at it like that. I just know what I need to pay each month and how much I spend on living expenses. I mean, I know I follow my budget by my thoughts ended there and I haven't really thought about it that much.

BTT. Aside from the things pointed out by kork13, I usually get to plan my savings for something I want. For example if I follow my budget for a month I have a savings of 500%, and lets say I want to buy a new laptop at 2000$, then if I follow my budget, i know that I have 4 months to save for it.

[frugalharry]

I always fail at budgeting that's why I never know or experience the benefits of it.
However, I can see that if you truly had followed your budget plan, the most important benefit is achieving discipline towards your expenses.

Many people including me doesn't have discipline with expenses especially in our current materialistic world.

[LivingAlmostLarge]

It depends. I am probably one of many here who doesn't budget. I stopped that years ago. I drew a budget in 2005/2006 when we changed incomes a lot and bought a much more expensive home. I did a gross annual budget with estimated housing expenses to see what we could afford after I put in my "needed" savings categories like retirement and savings. Then I lived on the rest.

Still do. No time to track every dollar. But then I am not really serious about paying off my mortgage. I suppose if I wanted to pay off my mortgage faster, and I could, I would track every penny and live according to $200 groceries, $200 eating out, etc. Then I'd try to save more and send every snowflake over to the mortgage.

But the truth is I save first and then live on what comes in. I do have preset bills so really only a few categories are truly flexible.

I have budget electric, gas heating, cell phones, internet, preschool, medical, dental, vision, car repairs, home stuff, travel, dog so monthly I know my monthly minimum 'nut' is $3k and I have $1k to play with.

Flexible - eating out, clothing, groceries, kid stuff, entertainment.

[feh]

It depends. I am probably one of many here who doesn't budget.

We've never budgeted either. I can think of 2 main reasons why:

• we've been fortunate to have a household income where covering expenses has never been an issue
• we live frugally; I know there is very little fat to trim, if it was necessary

It's only the last couple years that I really started to look at our annual expenses, as we prepare for retirement. Mint.com helps a great deal with that exercise.

[Like2Plan]

This topic came up for me because of the current budget fight in D.C. -- as a military member, the PTB (powers that be) are starting to get the word out & prepare us for the possibility of us not receiving our mid-month paycheck as usual if the budget lunacy carries on beyond 1 October.

This is another real life reason for having a healthy EF--even if you have a pretty secure job/steady paycheck. I really hope this doesn't come to pass because there will be a lot of folks in big trouble if this comes to pass.

[HereForTheCheese]

One of the main reasons I am no longer a proponent for avalanche/snowball methods of debt repayment is for that reason: people are spending a lot more time paying down debt than they are making the preparations to STAY out of debt. Just by reallocating some snowball funds towards savings, you can build a nice "igloo" for yourself.

[annibe11e]

I think some people view "budget" the same way they view "diet". Your budget is what you make/spend/save. Your diet is what you eat. You can restrict either, but you don't have to. Just knowing how much money you spend is valuable, whether or not you decide to make changes to your spending.

I put myself on a pretty restricted budget for the last few months. I set aside $50 for my birthday which coincides with a Lakota Pow Wow that I love attending. I planned to spend the money on myself there, but it turns out I'd gotten so frugal, I didn't want to spend. I just bought a bison burger, fry bread, and a small bundle of sage. I spent less than $15. To me, the value of my budget was to retrain my thinking. I kept thinking how much better that money would look in my college savings jar than as a string of turquoise nuggets I would rarely, if ever, wear. I spotted two items I really wanted that totaled $40. I decided that if I still want them next year, I'll buy them. I did not feel the least bit deprived waiting a year.

Yay budget!

[Petunia 100]

For me, the value of a written budget is the visual aid it provides. You see clearly that saying "yes" to this expenditure means you must say "no" to something else. I think there is real value in thinking about your priorities.

[MonkeyMama]

I think some people view "budget" the same way they view "diet". Your budget is what you make/spend/save. Your diet is what you eat. You can restrict either, but you don't have to. Just knowing how much money you spend is valuable, whether or not you decide to make changes to your spending.

I like this.

[MonkeyMama]

I've never been a big traditional budgeter, but have always had a plan. The plan usually involves not actually living up to income - savings first and just living on the rest. Having a strong aversion to debt is the only motivation I need to not spend more than allotted for spending. I am less concerned with categories and months than totals and annual spending - which also allows for more give-and-take. Some months are easier to spend less than others. A "total" focus means all the categories can give and take. (Interestingly, I recently read an article that stated annual budgeters are more successful). In addition, an important part of the plan is always setting aside savings for annual expenses.

Using software that does not take hardly any time, I do track every penny. We found this more useful when we dropped down to just one income. I look more backwards, but I can catch problems quickly and it's easier to make better financial decisions when you know literally where every penny goes. THat said, I clearly don't get caught up in maintaining too many categories.

Benefits: My spouse was furloughed early on in our marriage, and he was laid off a year or two after. We didn't have to do anything. We had never spent a penny of his income, and so our lifestyle did not change in the slightest. Financial peace like that is priceless. IT wasn't a particularly difficult or complicated budget. My paycheck went to 401k, bills, and annual expenses (saved until needed). His income went to a savings account, and was generally allocated to home purchases and investments. Survive on what was left. The End. Supporting a family of 4 on one income is not quite as simple, (as no income would mean no income), but I would have a good idea how much savings we have, and how long it would last, what fat could be cut immediately, and so on. We'd have a solid plan. I don't know how you plan anything when you don't even know how much you are really spending.

[bjl584]

I don't follow a strict budget either. I know exactly how much I save and how much I have, but I really don't pay too much attention to what I spend. I'm conscious of what I spend and I don't splurge. But, I don't track every dollar. I have the money to cover a layoff or an unexpected event, and I have a loose idea of what I would need for X amount of time. I also have areas that I could easily cut back on to save money should I need to.

[dojo]

I was never a budget person and few years ago I made enough huge money mistakes to last me a lifetime. Since the beginning of 2013 I have started to track ALL my expenses and this helped me a lot in seeing where my money goes and where I can also optimize. I'm also starting to write a 'regular' budget to help me optimize our spending even more. Being careful with our money is surely helping us remain financially stable than just spending carelessly and never knowing where we stand.

[TheKayla]

I think one of the biggest benefits to sticking to a budget is peace of mind. Peace of mind knowing you have the future planned, but just a system so you don't have to worry about it. No matter what your current situation, if you have a reasonable budget that is maintainable, your future worries are less, at least financially.

I'm a pretty simplistic budgeter -- I budget for the things I have to pay, and budget the top amount. If there's any left over, I decide what to do with it then. Maybe its an extra loan payment, maybe it savings, maybe it's a treat for myself for staying under budget. I'm getting into going cash only for all my discretionary expenses, things like food, clothes, fun, etc. I hope that this will help to simplify things even more so!

[SmartSpender]

Budgeting Made Easy

Hey everyone I'm new to this forum but have been in the financial management industry for about ten years now and find that a lot of people have a hard time budgeting because they dont really know where to begin. - My quick tip - Find everyone you owe money to each month, i.e. any debts, bills, utilities, rent/mortgage etc. Set up some sort of online bill pay so your not scrounging for the statments - but variable bills (like electric, gas, etc) on an automatic payment plan so you have a set amount each month - then you know exactly what you are 'required' to pay each month - these are your fixed liabilities - so consider a fixed amount to save each month - consider adding to your savings just the same way you would consider paying a bill - it's a nessecity. Any other income above and beyond what you are required to spend in these categories should be considered your assets - spend your assets liberally if you like between gas for your car - food, entertainment, and miscilanious there arent really many other things you need money for. Hope this helps.

Smart Spender