Do You Need a Budget?

Call it what you will — Budget, Spending Plan, Financial Allocation Sheet — knowing how much money you’ve got coming in and going out is very important, not only for your future, but also to your present and for your peace of mind. Going through life without a financial plan of some sort (for ease of readability, I am going to use the term ‘budget’) is like doing a high-wire or trapeze act without a safety net. You can do it, but it’s not generally recommended, and you might get into some serious trouble.

Often, getting the most out of life depends on figuring out how to best allocate and spend your money — to avoid the quagmire of debt, to save for the future, and to make the most of the present.

That’s why I’m here; that’s why I created this website. Because I know that if everyone could figure out even the basics of personal finance and money management, we’d all be much better off. And just because you aren’t scraping to pay your bills each month doesn’t mean you don’t need a budget. Everyone can benefit from setting and sticking to a budget.

Let me say that again: It doesn’t matter what economic class your family is in, or how much money you make, or what kind of car you drive. If you make money, you need a budget. And I’m here to help.

Everyone Needs a Budget

If you think you are an exception to this, let’s do a simple test:

  1. Do you have money?
  2. Do you like money?
  3. Do you want more money?
  4. Do you have a pulse?

If you answered “Yes” to any or all of the above questions, then you need a budget. ^_^

But don’t freak out. Most people, when they hear the word ‘budget’ think that they’ll have to do a lot of math, or that they won’t be able to have any fun ever again. None of that’s true. Okay, you’ll have to do a little math, but it’ll be easy math, I promise.

What is a budget?

Dictionary.com defines “budget” as: “an estimate, often itemized, of expected income and expense for a given period in the future.”

Or, to reword it for our purposes: A budget is an estimate of how much money you’re going to make and how much money you’re going to spend in any given month.

With me so far?

“But why do I need a budget?”

You need a budget because without one you’re likely spending everything you earn (living from paycheck to paycheck) or more than everything you earn (going into debt) without really having a good idea of where it’s all going. You might be saving a little here and there, but “saving a little here and there” does not a retirement fund make, and getting over your head in debt is all kinds of foolish.

You wouldn’t build a house without blueprints, you wouldn’t bake a cake without a recipe, and you shouldn’t spend money without a budget.

A budget is a plan for your money, so you know how much you have going out (bills), how much you have coming in (yay, income!), and how much you can save (or spend on fun stuff).

If you’re still unsure about what benefits a budget can have for you, check out my story, Buddy the Budget and the Battle with Due Dates.

Where to Go from Here

Check out my free budget and money management spreadsheets.

What Other People Have to Say About This Site

“I love Megan’s blog. Her writing is excellent, her posts are informative, and her style is intelligent intellectual meets friendly-neighbor-giving-worthwhile-advice.”
~ Abby Myers, Columbus, OH

{ 3 comments… read them below or add one }

Dexter May 7, 2011 at 8:24 am

Reinforcing keeping a budget is a great reminder to me! Thanks

Reply

Andrew March 5, 2012 at 11:16 am

Hello,
I had a question regarding budgeting. I can figure out what I’m spending on what each month, but how much should I be spending? I’ve heard the 10% rule for savings and no more than 30% spent on housing, but are there other general percentages for catagories to follow?
-Andrew

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mzumtaylor March 5, 2012 at 10:23 pm

Hi Andrew. Thanks for the comment, and the question. There are quite a few ways to think about budgeting and percentages. The two you listed: save at least 10% and don’t let housing eat up more than 30%, are both good.

My favorite broad overview percentages are from the Balanced Money Formula. The Formula says that you should have 50% of your money for bills/needs, 30% for wants, and 20% for savings. On the linked page you’ll find an example of how I’ve set up my finances to follow that formula.

I also wrote an ebook to walk you through the process of creating a budget following the guidelines of the Balanced Money Formula and the spreadsheet I created. You can download it free here, if you’re interested. I hope that answer helps, and if you have any other questions, feel free to contact me.

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