You can’t be involved in personal finance without someone bringing up the subject of budgeting. Many people are passionate about budgeting and they want to discuss every virtue and detail. Some people even post their budgets online for the whole world to see. It’s a popular subject, with many supporters and many opinions.
I Hate Budgeting
For me, budgeting seems like a colossal waste of time. I would rather bang my toes with a hammer, then spend time dividing up my paycheck into categories. I know I’m not the only one who feels this way. So, I would like to speak on behalf of my fellow budget haters.
Budgets are Unpredictable
After preparing a budget, it is almost guaranteed that something will go wrong. Your car will break down, you will get laid off from your job or you will need to entertain someone from out of town. Budgeting can’t change these circumstances. So, if gas prices hit $5 per gallon, then your travel budget is shot. You still have to get to work, whether you have budgeted for this increase or not. Life and finances rarely fit into a predictable budget.
Budgets can be Risky
Relying on a break-even budget can leave you vulnerable to emergency expenses. When this happens, people often resort to a credit card to bail them out. And, there is rarely enough room in a break-even budget to catch up from a financial setback. Credit card debt can stress a budget even further. Many budgeters recommend an emergency fund of at least a couple of months pay and I completely agree. If you aren’t budgeting for emergency expenses, you are taking a big risk.
Budgets Waste Time
Have you ever thought about what you could do with the time spent budgeting? Would this time be better spent increasing your income or studying investment opportunities? What is the ROI for creating and following a budget? If budgeting helps you to invest more money, then keep doing it. Otherwise, consider a more lucrative use of your time.
Budgeting won’t increase your income. And, it’s not very likely to reduce your expenses. So, why waste your time on it?
Instead of budgeting, I prefer to Pay Myself First. That means I save some money as soon as I get paid, then I pay my bills and then I live on the rest. I don’t worry about spending too much money on food versus travel versus entertainment. Instead, I enjoy my food, my travel and my entertainment, knowing that I’m getting ahead each month.
After I have invested some money and paid my bills, there’s no need for me to budget or ration the rest of my paycheck. I usually spend it wisely, but I spend it for my enjoyment. After all, if you can’t have some fun with your money, then you need a new financial plan.
If you budget all of your income for expenses and you never save any capital, then your budget becomes a liability, instead of an asset.
The Bottom Line
The bottom line is that budgeting doesn’t create wealth. Saving and investing create wealth. It makes no difference knowing where your money goes each month, unless some of it goes into investments. If you aren’t saving, then you aren’t getting ahead.
“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.”
William A. Feather – American Author & Publisher