Are you curious about how other people spend their money?
Of course you are. We all are!
To find out more about other people, I had a short series (and social experiment) A Pie in the Life that took a pi-chart look into the budgets of professionals all over the web with a short interview of money habits.
While the idea itself is pretty interesting, it’s also interesting what I assumed: that everyone has a budget that they can make a pie chart from.
So, I’d be showcasing budgets of debt-free people who are working on savings and those buried under old credit cards and clawing their way out alike, right?
For so, so long, budgets have been touted as the first step in getting out of debt and so, so necessary for broke people to get control.
But what about successful folks who make more than enough to cover the bills but live frugally and happen to not have (or need) a budget?
Here are three reasons you still need one:
1. A Budget Isn’t a List of Debts, It’s a Plan
The traditional sense of a budget is something like what the US Government has: there is not enough money to go around, so the budget decides who gets how much before the funds are cut off.
But for folks who were thrifty and avoided debt, or who smartly squirrel away graduation and wedding gifts, it’s not so much about deciding “who gets paid and who doesn’t” as it is deciding “what do I want to do with the money available to me now that all of my bills are paid”.
Budgets aren’t about your monthly expenses but about your future savings goals.
Take two examples in which two people saved some money. Both views of this account amount to a delightful $4,000.89. But which of these organizers know where they are going?
Fighter Pilot Patch, who lives budget-free by keeping a $1,000 checking account bumper, invests in real-estate.J Money chooses to pay down his mortgage like a champ and build his net worth.
Budgets don’t decide what your paycheck needs to cover – that’s just step one when you’re getting out of debt.
Budgets express how your empire is building and what your goals are. Budgets give money purpose (because if your money has no purpose, you might just be greedy).
2. Disorganized Money = Wasted Money
Like a good road sign, when you look at your savings account or spreadsheet, it should be clear where you are going. Otherwise, you are on the money highway and making great speed, but not really going anywhere.
Here’s a success story about how Money Beagle was able to pick up a camper for a great price simply because he knew how far along to his goal he was when an opportunity came knocking.
Knowing what your goals are and knowing where you stand allows you to manage your money with a cut-throat knack for getting deals.
With an organized, “budgeted” savings account, when you come across a Craigslist Boat for sale or a Groupon for a Carribean Island vacation, you know within minutes whether or not you can afford it.
But with a lump-sum savings, you’ll need to do some emotional math to decide if you are willing to risk it.
3. Good Without a Budget = Astonishing with a Budget
Here’s a simple piece of logic: if, in theory, a budget helps you organize and maximize your money and you are doing great without one…. how well might you be doing if you had one!?
If your usual routine is to kick your excess money over to savings for the rainy day that always comes, sure you will have a nice nest egg. But without a plan for that savings, your money grows and grows (which is awesome) but its purpose blurs and blurs.
The bottom line is that a budget (or spending plan) is like writing a note to your future self about all the work you did to make him or her successful. It’s not necessary, but dang it feels good!