Budgeting is a waste of time!. To me, a budget is a list of planned income and expenses. It is a road map to achieve your financial goals. Most people look at a year’s worth of expenses and take an average and /or adjust for inflation and use it for their budget. Is that enough?
Budgeting is a waste of time, if you do not spend the time to really analyze your expenses. Before you create a budget, you should look at each expense to see if you need it. Analyze the expense for alternative choices. Let’s analyze the utility bill. Can you reduce the water consumption? Use water saving devices and techniques such as flow restrictors, low flow toilets, stop running the water, and change lawn watering to be more efficient. You can replace the lights with more efficient compact florescent lights, turn off the lights when you leave a room, fill up the dishwasher and clothes washer and dryer. What else can you do?
Changing your habits can pay off handsomely! Something as simple as using a cold water wash for your laundry and taking shorter showers can cut your hot water usage by a third. Installing a programmable thermostat will reduce you heating and air conditioning costs, if you lower the thermostat for heat in winter and raise it during the summer. During the winter, reduce the temperature during the day when no one is home. You can lower the temperature while you are sleeping and in the evening you can wear a sweater when you are home. During the summer, raise the temperature when you are not home and try to keep it a couple of degrees higher when you are home. Weatherizing your home can pay off very quickly too.
Examine each expense and think about what changes you can make to be more effective. If you spend a lot for transportation, what are your alternatives? Should consider public transportation, carpooling, buying a less expensive car or having only one car ? Can you maintain your car yourself, find a less expensive mechanic, or take advantage of specials? Do you have a car payment? Is it high interest? What alternatives are available? Can you pay it off? Review your automobile insurance! You can increase your deductible, shop other insurance companies and review your coverage for duplication or unnecessary coverage.
Don’t overlook examining your grocery and household purchases. Are you using coupons? Is the supermarket the best source of your groceries? Are there farmer’s markets in your area? Are there other sources you overlook for produce or groceries? Should you buy household items at the supermarket? It is convenient, but not the lowest price? Perhaps purchase household items at Costco, Walmart, or Target once a month. Analyze each item! Do you buy national brands or store brands? This is important for food or household items! Do you buy prepared or packaged food? They are more expensive than buying individual items and raw products. Most store brands are high quality and make excellent household items! Expand this to personal items.
Do you see a trend? What is the use of a budget if you do not make changes to reduce the costs of the things you buy? Here are three questions that will help you decide what to do. Do you need to keep using a particular product or service? Can you find a better choice? Can you find a better alternative? After you complete this exercise, you will be ready to prepare a budget. Do you need a budget? You may want a budget to help you achieve your long range financial goals, but you won’t need a budget. What do you think? Is budgeting is a waste of time?
Photo by:Â jbcurio
You’re right, budgeting is a waste of time IF you don’t use it as a tool to help you reach your goals or improve.
Companies use the budgeting and reporting process to analyze income and expenses to improve performance. Individuals should do the same.
For me using a budget is a constant, at least weekly, activity. It’s a tool you can use to help you achieve your financial goals. However, it only works if you’re actually working it on a regular basis, finding more ways (and more creative ways) to reduce spending in various areas so you can funnel more money toward a particular financial goal. If you don’t work it regularly and don’t focus your efforts on attainment of your goals, it’s absolutely pointless.
I agree, but I can reduce my use of lights to the point of walking around in the dark. I suggesting looking into a better way of producing light. For example, compact florescent lights.
A budget can be a wonderful tool. However, it has to mean something. You can’t just have numbers in a spreadsheet and expect to magically end up with money. It has to affect your actual spending too.
I agree! I am looking into the value of the expense. Is it the use of funds?
Interesting viewpoint KC! A budget will help you find the cracks in your spending habits so that you know where cutting back actually helps.
My approach is similar to a Budget Analyst or just plain problem solving. I looking at the expense and question if I can spend my money better.
Analysis is really important. THanks for pointing it out!! I like the recommended exercise. It’s amazing how much one spends without thinking.
This kind of analysis is routine in business! It should be routine with personal expenses as well.
Budgeting to just say there are the numbers is a waste of time, just like you state above.
I wish I could say that I do budgeting, but I don’t. I do something that I call an automatic budget, which is basically a monthly breakdown of what I think my expenses should be and then comparing that number with my checking and credit card statements. If I find that my expenses are much higher than I would expence, I roll up my sleeves and research why.
Very nice write up on the topic of budgets, and the areas people could focus on trying to reduce expenses… very clever 🙂
Thanks. I have been doing this most of my business career and apply these techniques to my personal life as well.
Hi Krantcents. These are really solid recommendations. Also, it’s nice to be reminded of these spending tips, very worthwhile.
Thanks. I ti s a cross between problem solving and business analysis. Stay tuned for more next week.
Budget might be a little strict. However, a plan, is necessary.
I agree, however I am analyzing the expenses similar to businesses as my 3 questions indicate.
Catchy title! And you make a great point: a budget just for the sake of having a budget wastes a lot of time and energy. BUT…if you have financial goals, they cannot be achieved unless you have some sort of money management plan.
Goals and a plan are certainly part of it! Each expense needs to be analyzed for alternatives or if you need it at all.
For some people, it can definitely be a waste of time. I think everybody budgets to some degree. I suspect most folks who say they don’t budget actually do budget subconsciously on a macro level.
All the best,
Len
Len Penzo dot Com
I agree that everyone budgets in some way, but I am suggesting to analyze each expense as well.
Isn’t analyzing one’s expenses budgeting? A basic budget is important, but the habit changing is really the big one for long term sustainability.
Most of the definitions I found of budgeting is as follows: An itemized forecast of an individual’s or company’s income and expenses expected for some period in the future. What I am suggesting is using business analysis/problem solving techniques to look at expenses differently. Too many people just accept their expenses as though they can not do anything about it. In some way, I am suggesting to not accept anything as it appears!
It’s sounds like you are saying budgeting is a waste of time unless you do a rigorous analysis. That may be a little strong to me. I think perhaps this way gives you way more insight, but I do think people gain value by simply knowing what things cost and planning what they are going to spend. Perhaps I’m missing something though.
Out of the analysis, you learn if there is an alternative, a better choice or if you really need it. Should you just accept that your utilities is increasing when you can do something about it. For example, replace lights, use more energy efficient appliances, or change habits like using a cold water wash. It is up to you how much time and effort you invest in analysis.
I think the main benefit of budgeting is to make your aware of your finances and develop a plan. You’re planning how you’re going to make your money work for you, instead of letting your money work you. If you can achiever this same awareness and plan without budgeting, I think that’s fine. I do this by watching my finances constantly through Mint and having goals. When making purchases now, I assess how each purchase aligns with my goals, and how it fits overall with my finances.
A budget is intended to help you reach your long term goals. Do you need a budget to control your expenses, no! It is far better to analyze your expenses to get them as low as possible first.
No wonder you guys voted this the most controversial article! “Budgeting is a waste of time…” Them’s fightin’ words on a financial blog! Of course that’s not what you meant, but you couldn’t very well fit “Budgeting is a waste of time, unless you spend the time to really analyze your expenses” into a title. I work for Mango Money and recently we did a post on Google Docs. I mention this because within Google Docs there is a huge selection of budgeting worksheets. I’ve been using one lately, and it’s been really helpful. (http://www.mangomoney.com/blog/how-to/google-docs-free-easy-and-just-a-click-away) Â Â
There’s also a site called The Birdy (http://thebirdy.com/) that I’ve been hearing a lot about. It basically takes all of the work out of budgeting. But you’re right– be sure to actually analyze your expenses and look at these numbers when using budgeting tools!Â
These choices were entirely mine! Budgeting is more than recording numbers, it is analyzing trends and proactively reducing expenses.