If you are searching for advice on how to better manage your personal finances you are in luck, there is a plethora of information available on various media outlets.
When it comes to personal finance there is one word that is mentioned in almost every piece of advice: the importance of having a household budget. Taking that one step farther there is software available to help you manage the family money as well as forms that are available to download onto your computer to help you track your spending. With all these tools readily available it would seem that everyone would find making and following a budget a piece of cake, yet that is not the case.
When it comes right down to it there are some people that simply do not feel comfortable conforming to the rules that budgeting imposes on your spending. If you find yourself having trouble adhering to your budget you may want to consider thinking of it in different terms.
Is your budget useless?
Budgets can be vital tool in helping you track your spending and manage your money but only if you have a budget in place that is reasonable and relatively simple to follow. One of the biggest budget blunders occurs when you make you budget according to how you would like your finances to be instead of how your finances are in real life.
You would be surprised how many people cheat on their own budget, excluding expenses that they are fully aware they are likely to incur in order to make the numbers work. Budgets work because they establish guidelines and restrictions on how and where you spend your money, if you try to work backwards and make your budget “fit” your spending habits you will likely find the numbers will never add up.
Consider a spending plan.
If you find the restraints of a “budget” are too confining you may want to consider developing a spending plan.
A spending plan is very similar to having a budget however the two have distinct philosophies and function differently. For some people the word budget automatically conjures up images of depriving yourself of things your want and restricting your spending. While this is a good thing for people who are living beyond their means there are still people who work hard and live within their means and the thought of not buying something they can afford because it is not included on the budget rubs them the wrong way. In general a budget tells you how you are going to live your life where a spending plan allows you to work toward the life you want to live. The goal remains the same; to control overspending and meet financial goals however the slight change in words can have a huge impact on how some people perceive the two strategies.
Establishing a spending plan is very similar to making a budget in that you look at your expected income and expected expenses; the difference basically being that instead of having to fall within x amount of dollars in each category you set a goal for what you would like to spend in that category. When you have finished your list you can see how your income lines up with your expenses and make adjustments accordingly.
Choose the process that works for you.
The most important thing about having either a budget or spending plan is finding the process that works best for you and your family. It stands to reason if following a “budget” doesn’t work for you then by all means try a spending plan. The difference may be minuscule but if changing the definition of the process and the philosophy behind it allows you to better track and manage your finances then you have reached your goal.
Trisha Wagner is a freelance writer for DepositAccounts.com, where you can compare rates from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and saving money.
{ 3 comments… read them below or add one }
I don't have a budget; it just doesn't work with the way I think. I do the vast majority of my spending through my credit card, and I review my spending at the end of the month and evaluate. This works fine for me. I've never had a problem with spending impulsively or overspending.
While I think its wrong to say that a budget isnt right for everyone; I do believe you are right that everyone needs to do it their own way (call it a spending plan if you want; its still a budget). Too many people are concerned about some trick or magic plan to get out of debt. In a recent post, I chronicle the steps that everyone needs to take to eliminate debt.
My budget is named 'savings plan' because it started out as a plan to save enough for the major expenses I had that year. It's still a budget though.