If I’m not in debt, should I have a budget?
Sometimes people ask me, “If I’m not in debt, should I have a budget?”
I say yes. Your spending habits are your greatest clue to tell if something is dysfunctional in your family dynamic or individual behavior. You might not be damaging your financial situation, but if you’re blind to the issue, you could be hurting your family or yourself.
Aside from any issues of dysfunction, when you don’t know what you’re spending your money on, you can’t know if those dollars are well-spent or wasted.
Figuring it out is simple, but not easy. The most difficult part is consistency—consistency in gathering data and consistency in review to make sure the data reflects EVERYTHING. There are two methods to gathering this data:
- Low Tech – tracking and recording everything on a daily basis
- High Tech – using a budgeting program to organize and categorize
Low Tech is simple but a little laborious:
- Daily - Track every single purchase through receipts or writing it down
- Weekly – Review all purchase records and categorize/total
- Monthly – Summarize all week’s categories and totals
- Quarterly – identify average expense per category to create target
Long-term I really encourage people to go “high tech” and get on www.Mint.com. It’s free online budget-tracking software, and it is wonderful.
The only other comprehensive budgeting software programs on the market before this were Microsoft Money and Quicken. Both take too long. People end up abandoning it because it takes hours and hours to get it set up and manage. If you fall behind, it’s really difficult to get back on track.
Mint takes everything bad about those programs and makes it a non-issue. You’re safer on Mint than with online banking, because Mint has a read-only connection to your bank. You can’t hack into Mint and transfer money around. You can only look at the bank balances as they download the transactions.
A lot of Mint’s features help you avoid what made Quicken fail as a tracking tool. It’s online, so you can log into it whenever and categorize transactions. I know a lot of people check Mint in the middle of the day as they’re eating their lunch. They don’t have to wait until they get home to do it on their own desktop. There’s also an iPhone app.
You can set up email alerts for low balances, bill reminders, credit available or left (if you’re using a credit card), any unusual spending, over-budget spending– pretty much for anything you want, you can set up a notification for it.
I haven’t spoken to anyone who doesn’t like Mint after they try it—and NO ONE has needed help setting it up, which isn’t true of most other programs. If you aren’t actively tracking your spending, check out www.Mint.com and you’ll be surprised at how easy it is!
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