This is going to come off as stupid, but I read a lot of people on message boards posting about how they have a budget, but don’t seem to have any extra money at the end of the month. Somehow during the month the money was spent somewhere else. They “should” have extra money say $200 at the end of the money according to their budget. Where did the money go?
Here’s the REAL DEAL. You CANNOT have a budget without a spending plan. You CANNOT make a budget work without RECONCILING SPENDING.
What that means? It means you can’t magically wave your wand and say I want to budget $200/month for groceries, $100/month for car gas and it’ll happen. NO. Whether you use cash, credit cards, debit cards, you need to track your spending. Why? Isn’t that what the budget is for? I’m telling my money where to you? Yes. But have no idea if you are actually FOLLOWING the budget!
I mean it’s easy to go over budge and say spend $105 on car gas and $220 on groceries. There were $25 of the money you were “expecting” to save at the end of the month. What other leaks are there? Did you go over in other categories?
Were there unexpected expenses? Did you blow cash on something and forget about it? Give cash for an office birthday or lunch out? Small things which are easy to forget, eat into a budget.
I’m really surprised at how hard it is for people to realize that just because you have a budget, you have to track your spending to see how you are sticking to it?!! It’s like saying I am on a diet, but then not counting your calories to see if you actually are dieting!
Sorry if this seems harsh, but I have to say I wonder where did people learn personal finance? A budget doesn’t seem like a hard concept to learn or understand. It’s much like, why and how do people overdraft on bank fees? How do you not realize what you spent? That once the money is gone, it’s gone. With a checking account, you aren’t supposed to look at the ATM screen and think I have $500. NO you should know you wrote a check for $250 and that money is no longer yours!
But enough on that rant. I just wanted to explain to everyone, that a budget doesn’t mean you can’t or aren’t overspending. It just means you prioritized categories and how much to spend. It doesn’t tell you if you are actually spending that much in each category or more or less.
FWIW, I budget annual everything, and break it down monthly.
5 responses so far ↓
1 Not My Mother // Dec 29, 2009 at 5:58 pm
I completely agree. So many people seem to think tracking their spending is boring or difficult or scary, but it really isn’t. I suppose these are the people who really benefit from the envelope system or having multiple accounts for all their different needs, but it’s still possible to overspend anyway.
My ex is that way. He sold something on eBay for $200 and then in the course of an hour’s conversation told me he’d pay for 3 different things with that money. When I told him he’d just spent it three times over he looked at me dumbfounded. I still don’t think he understood.
He left me with a lot of debt and for a long time facing up to my finances was really scary but now tracking everything is FUN. It makes me feel in control – of one thing, at least
2 LAL // Jan 1, 2010 at 3:27 pm
Not my mother, exactly. Spending money three different ways doesn’t work. People assume well I budgeted $500 for food why don’t I have money at the end of the month? Did you spent more? Did you not budget enough? Ugh.
3 me in millions // Jan 1, 2010 at 5:12 pm
I’m kind of obsessed with tracking my spending. I’ve been doing it for over a year now! It’s so interesting to see where it all goes.
4 Forest // Jan 2, 2010 at 11:00 am
Ive been filling out forms for budgeting and am realising that I have not been tracking my spending nearly as well as I should be…. I used to carry a little book (of shame) around with me and I would jot down everything I spent there so I could not lie to myself…. Many people seem to hide their spending from themselves even!
Buying a can of pepsi became much harder when i knew I would have to pull out the book and write down! I think I am going to start that again
5 LAL // Jan 3, 2010 at 5:35 pm
Totally interesting to figure out where it all goes! I’ve been doing it for 3 years.
It definitely sucks to write down everything!
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