Q: I got married quite young in my early 20’s, and my husband and I never really saw eye to eye with money. We ended up getting divorced and now amicably share custody of our three kids. In a way, I find it much easier to manage my money on my own; I don’t need to be accountable to anyone but myself, or maybe I’m just making up budgeting excuses. I started seeing someone about a year ago and we’re beginning to plan a future together. He manages his money carefully and was surprised that I don’t. Is living with a budget really that important? ~Irena
A: The short answer is yes, budgeting your money is important, however, budgeting looks different for everyone. The benefit of budgeting is that you can plan how best to spend your money. You can ensure that your bills are paid, that you save for what you need throughout the year and longer-term, and you can avoid relying on credit to make ends meet. A budget also helps you determine how much more you need to earn if you find yourself running short. Knowing that you have what you need gives you peace of mind.
There are many different ways to budget. Some people prefer a spreadsheet and follow their plan quite strictly. Others are stricter with their spending to start with, or when their life circumstances change, but generally know where they stand and how much they want to spend. There isn’t one right way to do it but finding what works for you can take some trial and error. However, along with different ways to budget, are different excuses people make about why they don’t budget.
Here are six budgeting excuses we hear, along with how to overcome them:
1. “I tried budgeting once and it didn’t work.”
Giving up because you tried it once and weren’t successful is much like going to a restaurant, having a bad meal, and swearing off going to restaurants again. If you have a bad meal in one particular restaurant, you might try another one that serves different food, or you might try the same one but at a different location.
Budgeting is very individual so there’s more than one way to budget successfully. Rather than give up, look for different ways to budget. For instance, if you tried an app on your phone, try an interactive budget spreadsheet this time. If you’re better with pencil and paper, use a budgeting workbook instead. If you used pre-assigned budget categories that didn’t work for you last time, rename them and try again. Some people even budget by the type of store rather than the types of expense, e.g. Costco/big box versus groceries. Do what works best for you.
2. “There’s not enough money to budget.”
When money is so tight that you face daily decisions about what to buy and spend money on versus where to cut back, you are already budgeting more than you realize. That is what a budget is – it’s a plan for how to spend what you have.
What to do instead
Ultimately, a budget should help you move forward. When money is tight look for ways to avoid debt and improve your level of income. Tracking what you spend might identify a leak in your wallet that you didn’t know you had, e.g. giving your kids lunch money instead of packing lunches, buying coffee or treats on the run, or an expensive communication bundle that a simple phone call can cut down to size. Couple reduced spending with a slight increase in income and you may just find better balance.
3. “I don’t get regular pay cheques.”
When your pay cheques fluctuate, or your income is irregular, it can be harder to budget, but it certainly isn’t impossible. You might be self employed, work on contract, have several jobs to make up the equivalent of full time work, or you might be a student or seasonal worker. Many people in similar situations budget their money very effectively, so you can too.
3 Ways to Budget Effectively with Irregular Income
Overcome this excuse
You just need to employ different strategies. For instance, figure out your average monthly income from past tax returns and use that as the base amount for your spending plan. Open a separate savings account to use as your “budget balancer.” Set money from the better income months aside in this special savings account to top up your leaner months.
Running two budgets, one for the leaner times and one for the better times tends to be less effective because it’s easy to spend money we anticipate receiving. If something happens and our plan changes, the resulting debt on credit cards becomes an expensive and stressful reality.
4. “I’ve always managed just fine, so why change what isn’t broken?”
Setting up a brand-new budget can be as exciting as watching paint dry. Or worse, it can be a few hours of tedious work, followed by tracking your spending, making choices about what you can afford and what you can’t, and reviewing your progress on a regular basis only to find ways to feel guilty about not doing better. Is this about accurate?
How to Get Started Living with a Budget
It doesn’t have to be that way. Deciding what you want to spend your hard-earned cash on now, saving for what you want to do in the future, e.g. buy a home, travel the world or start a business, and ensuring that your golden years aren’t fraught with financial instability can be fun. It’s all in what you make of it. Find apps that work for you, both to track your spending, outline your budget, and show you the progress you’re making towards your goals. Read books and blogs that help increase your level of financial literacy. Learn how the markets work and consider trying your hand at buying and selling stock. You know where you’ll end up if you keep doing what you’re doing; imagine where a little more planning could take you!
5. “There’s always some expense that derails my plans.”
Does it feel like every time you catch a break and you’re getting ahead, life gets expensive again? You’re not alone. I was speaking with someone the other day and they had worked hard to become debt free, but they had depleted much of their savings in the process. An unexpected dentist bill, on top of Christmas and holiday bills, and a car repair expense – they were feeling quite discouraged.
How to Stop Living Pay Cheque to Pay Cheque
Avoid a budget collapse
The one thing we can always count on is the unexpected, so the solution is to plan for the unexpected. Do this by living below your means so that there is always more money than month, establish a savings account for unexpected expenses, use a realistic budget to guide your spending decisions, and protect your credit rating. Sometimes when life throws us a curve ball the only way to keep ourselves going is to pay for the expense with a line of credit. The all-important next step then is to have a solid plan how to pay the credit line off and get back on track. Having a budget makes managing unexpected expenses and situations much easier.
6. “I don’t have money problems, so why bother budgeting?”
You might not have money problems (now), but why not manage your money in a way that does even better?
With an effective budget in place, you know how much extra you can pay down on your mortgage, save for a vacation, or top up an RRSP contribution. With breathing room in your day-to-day spending, ensure that your credit cards are paid off in full every month, that your finances are organized, that you have a plan for what to do with your tax refund, and that you’re getting the most out of every penny you earn. When you look at those who are doing well, they pay a lot of attention to how much they earn and what they spend. If they can save $10 by packing a lunch, they will.
The bottom line on your excuses not to budget
There are lots of excuses about why not to budget. No one ever said you have to like budgeting; even those who are good at budgeting don’t always like it. When you first start living by your budget, try not to get discouraged. A new budget doesn’t really start working until the second or third month. It takes time to not only juggle things until they balance, but more importantly it takes time for you to get used to living by a budget. Go easy on yourself and don’t knock it ‘til you’ve tried it.