Budgeting Part 1 of 3: Do You Need A Budget?

BUDGETING 101: for people who hate budgeting PART 1/ 3

When working with my clients, the first thing I have them do is forget about money and DREAM BIG! I know it sounds weird but stay with me for a moment. Next, we take those dreams and organize them into short/mid/long term goals. Then money and finances comes in. My approach to personal finance is that your money should fund your dreams and goals. And the way we do that is through… BUDGETING.

Do you really need to budget?


Don’t believe me? If you answer yes to any/all/many of these, keep reading.

  • Is your income bucket dry at the end of the month?

  • Do you use credit cards to fund your lifestyle?

  • Are you lacking in long term savings for retirement?

  • Would you like to go on more vacations?

  • Do you ever fight or stress about money?

  • At the end of the month do you wonder where all your money went?

  • Will your kids need to take out loans to go to college?

  • If you needed a new roof on your rental place (I do!), you would need to pay for it with credit cards or loans

  • Does your retirement plan include working forever?

If you answer False to any of these, you need a budget.

  • You have 3-6 months of your typical household spending saved and earmarked for emergency funds.

  • You know your monthly household expenditures.

  • You mapped out your short, mid and long term goals and are actively working towards reaching those goals.

  • You know how much you need to retire and have a target date when you will likely reach that number.

Why are you NOT budgeting now?

Now that you understand, you should be budgeting, let’s address why you aren’t already doing it.

  • You make too much money, and have plenty at the end of the month

  • It sucks the life out of you

  • You tried it and quit

  • It takes too much time and its boring

  • The tools for budgeting stink

  • It causes fights at home

  • It’s too much work and nobody wants to take the responsibility for driving the conversation

  • You are slowly but surely reaching our goals without one

  • You’ve tried it before and failed. You just can’t stand to have to fail at it again

That’s just a few reasons (or excuses) I’ve heard over the years. I get it. Budgets aren’t exciting. But it’s a key component to reaching your goals. And goals are exciting. For example budgeting could fund a fabulous vacation all paid for upfront.

From my experience, 99.9% of people would benefit from a budget. Even those of you with plenty of cash at the end of the month!! Hello, retiring*** at 54 instead of 56! Hello buying the turbo instead of just the V6!! Hello, philanthropy.

The Importance of a Budget


watch this short 50 sec Video to see why you need a budget.

Thanks to my wife for sketching out this visual.

  1. Income filling a bucket at the top of the process.

  2. Out of the income bucket are a set of spigots, that are used to fill expense buckets, first and then goal buckets next.

  3. The key is to control your expense spigots so you can fund your goals.

Non-Discretionary Expenses

The biggest monthly expense for most is housing: a mortgage or rent payment. Followed up by a standard set of non-discretionary items: gas, electric, cell phone, internet, insurance, car, student loans, etc.

Discretionary Expenses

Then you have discretionary buckets: groceries, gas, eating out, beers and clothing. This is where a budget is key in getting a handle of your discretionary expenses. Watch out little expenses add up fast…ahem, eating out.

Your goals

After you deal with your general monthly expenditures, you are left with the excess to allocate to your savings for goals like: buying a house, buying a new car, going on a vacation, saving for kids to go to school and retiring. Typically, the savings buckets are filled with little drips from spigots, if there is any excess at all. Sometimes, your top bucket is empty at the end of the month, and you end up needing a credit card to fill some of your expense buckets.

Next: How to get Started

it’s easier than you think