When I was younger, I tracked and budgeted my spending daily, and even though constant attentiveness paid off for me, it didn’t pay off in the way you might expect. On that note, I don’t think everyone needs a budget. In fact, for some, I think having a budget can backfire.
Who Needs a Budget?
First, let me be clear that I do believe some people need a budget. If you’re living paycheck to paycheck, as up-to-two-thirds of Americans are, you should absolutely identify where every dollar is going. And, ideally, use that information to make necessary changes.
Anyone undergoing a major life change should also monitor their budget for at least a few months. For example, as I move from a small town in Georgia to a midtown condo in Chicago, you better believe I’m laser-focused on my spending. Consider utilizing apps like You Need a Budget, one of the most popular budgeting apps, to guide you through any major transitions.
If you’re having a child, starting a new job, or even getting married … well, you need a budget (the philosophy … and maybe the app, too).
The folks over at You Need a Budget have also written extensively on successful budgeting, which could also be helpful through your transition.
How Can Budgeting Backfire?
My move away from budgeting began in my final years of graduate school. Like most grad students, I was making very little – close to the California minimum wage while living in the San Francisco Bay Area. Tracking every dollar, every month, for years, I could no longer avoid the obvious: The problem wasn’t that I was bad with spending. Rather, the problem was I had so little to spend.
I couldn’t budget myself out of that problem. Focusing on the details of spending, I lost sight of the big picture. I needed to increase my income … by a lot.
As I said before, tracking my daily spending helped me – even though it didn’t help me identify my unnecessary costs as I had hoped, I did learn what my real issue was.
The adage is true: if all you have is a hammer, every problem looks like a nail. So, if all you think about is budgeting, every financial issue is a spending problem.
Can we budget and think about raising our incomes?
Perhaps – but we must recognize our limited attention. We don’t have unlimited time or an unlimited ability to make decisions. Budgeting can be hard work and very time consuming. If you’ve only got enough mental energy for one hour of …….