TLDR: No, you don’t.*
*If you really have your finances under control and know where all your money is being spent. But if you want a great way to meet your financial goals, save more money, and take control of your finances, then yeah, I think you do.
Budgets suck, we all know it. I’ve tried multiple budget apps, including shelling out $100+ for Quicken. Nothing made it suck less, for all the classic reasons (time consuming, it feels constricting and controlling, inflexibility, expenses varied month to month, I thought I was responsible enough, my savings were increasing so I didn’t think I needed one, etc.).
Then one day something absurd happened. I started to enjoy it. Like, really enjoy it. My wife and I went from a quarterly review to bi-weekly reviews (turns out she enjoys it too). So, what changed for us?
We realized the POWER of a budget.
Budgets have helped us do the following in just a few years:
- Eliminate all debt (excluding a mortgage)
- Increase retirement savings rates and open Roth IRAs
- Triple our net worth
- Declutter our home and our minds
- Almost entirely remove the feeling of regret that inevitably follows most impulse shopping
- Prepare for the expansion of our family and our child’s future
Funny thing is, what worked for us wasn’t a fancy budgeting tool or nifty charts and graphs. It was an excel worksheet we made ourselves and manually update expense by expense every single time we review it. At first it was painstaking. Over time, as the wins started happening, as we started gaining momentum, we began looking forward to budget time. We (mainly my wife) even poured extra time into formatting our budgeting file to make it pretty and visually pleasing. It also helps us highlight the key info we’re trying to understand: Where’d we do well, where did we spend too much, how are we doing for the year, are we on target to meet our goals, etc.
Switching from budgeting software to manual entry for EVERY expense came with plenty of eye rolls and typical procrastination. It also had the affect of really, really entrenching us into the details of our cash flow.
We were reviewing every single credit and debit which forced us to do at least a very quick mental check on whether or not it was worth the cost.
When we first started, we focused on a couple key categories (home, cars, food, entertainment, and everything else). The “everything else” was always our downfall, as I imagine it is for a lot of budgeters. It’s difficult to predict spending at times. Certain expenses pop up once in a while or even once a year (insurance policies, Amazon Prime, etc.). When they do, they can change the outlook for your month.
After a while we realized we shouldn’t JUST look at our budget on a monthly basis. We also realized and completely accepted that some months are just bad. So, we did two key things:
- We set spending goals on a YEARLY basis, and divided by 12 for each month
- We tracked our expenses against both that monthly amount and a YTD amount
It helped us keep a level head when those expenses would hit, and prevented us from dumping yet another budgeting technique. We continued refining and tweaking our budget file, and regularly have further improvement ideas to continue perfecting the file.
Having worked with our budget file for approximately two and a half years, we feel like we’re in complete control of our finances. We know where our money is going. We spend our money where and how we want. We’re meeting our goals and preparing for our future. What we haven’t started is cutting out any and all fun in our lives. We spend on what brings us joy, and don’t feel guilty about it, because we planned for it.
My wife summed up our new found attitude towards budgeting wonderfully with the following:
“You’d think budgeting would take away your freedom, but it has actually given us more freedom.”
– Mary Mankin
Mankin Money 