Back by popular demand, Budgeting is still a waste of time! Last week, I wrote an article called “Budgeting Is a Waste of Time”! I offered some suggestions about analyzing your expenses. Look at every expense and answer my three questions to determine if you should make any changes. What additional expenses need analysis?
The next expense category that you should look at is entertainment. Many people feel this is a discretionary item, because you can give up entertainment if your expenses increase. I think some entertainment is important. Generally, dining out, movies, movie rentals, amusement parks are some of the things in this area. What can you do to keep your expenses low! If movies are important to you, see if you can buy group tickets, this can save you as much as 40%. Dining out expenses can be reduced using 2 for 1 coupons, or purchasing $25 coupons at a huge discount through restaurant.com, or take advantage of frequent diner programs. Keep in mind what is important about dining out; it is a social situation not a spending marathon. You can always go to a less expensive restaurant and still have a good time. The purchase of books, magazines, music, cigarettes and alcohol can be reduced by using Amazon, iTunes or Costco.
A review of all your insurance expenses is very important. Think about your deductible, raising it to $1,000 from $500 can save enough to make a difference. Review your coverage to make sure you have sufficient and the right coverage for you. This can be a hidden expense if you have a loss. Last, talk to your agent and see if you are with the best and least expensive company based on your needs. You can also check or confirm, by comparison shopping your various insurance needs on the Internet. Is there a Flexible Spending Account (FSA) available? Are you participating in the FSA plan? Using pre-tax dollars in a FSA is like getting a 15-35% bonus depending on your tax bracket. If your prescription plan allows you to use a mail away program, take advantage of the savings.
Take a look at all your loans (mortgage, auto, personal, student and HELOC) and make sure you have the lowest interest rate you qualify for. Who knows how long these low rates will be available? These small changes add up! Aside from a lower payment, you save interest and a shorter time period. If you cannot negotiate a better loan rate, consider paying off the highest interest rates first. If you have any debt on credit cards, transfer balances to lower interest cards. Don’t be complacent with your debt; you can do something about it!
One of the most overlooked areas is income. Can you get a second job? Are you eligible for overtime? Do you receive a large tax refund at the end of the year? Should you adjust your withholding so you can use it during the year? You can increase your 401K deduction, IRA or Roth IRA. You can change your investments that are not in a tax referred account to yield dividends that may be used as income. Being proactive with your expenses is important, don’t take it lightly. You can change or adjust income, savings and your retirement contributions.
I know I threw a lot of information at you between the two articles. You may feel a little overwhelmed, but don’t just sit there and do nothing! Your financial future requires you to take control of your income and expenses. To just fill out a spreadsheet or some budget form and not analyze your income and expenses is similar to rearranging the deck chairs on the Titanic. In case you forgot, the Titanic sank on April 15, 1912. I still believe budgeting is a waste of time unless you analyze your income and expenses. After you evaluate your financial situation, prepare your budget to achieve your financial goals. Review your budget regularly and adjust as necessary. Was this helpful?
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To me, the most important point here is “after you evaluate your financial situation, prepare your budget to achieve your financial goals. Review your budget regularly and adjust as necessary.” Some people go through big changes in their finances, but still stick with the same plan. That’s doesn’t work too well for many, especially when it is a loss of wages (and they still spend) or big increase in wages (and they don’t increase investing)
You got it! A budget is a plan to reach your financial goals, but it should be monitored and adjusted based on realty.
So wait, what you’re saying is that we SHOULD budget? ‘Cause this kinda sounds like a budget to me.
What I am saying is a budget helps you achieve your financial goals, however you need to analyze you income and expenses. A budget without doing that is a waste of time
I hate budgeting, it is such a pain in the ass! I am not organized enough to keep track of every cents.
Instead, we get $100/week allowance each and we can spend or save it. Anyway, we spend way less than we make so I think we are ok.
If that works for you, keep it up! Budgeting is not fun, although I spent 30 years doing some sort of budgeting for many companies. The number crunching part is tedious. I always liked the questioning side.
If you are mentally aware of all your income and expenses, then maybe budgeting isn’t required. For others, this may be a necessity.
I agree, but a budget may be needed to keep you in check with your long term goals.
I think the point here is don’t be half-assed about budgeting. If you don’t take stock of changes in your finances, or potential changes you can make to better achieve your financial goals, then your budgeting is kind of half-assed, and will to that degree be little more than a math exercise.
If you always spend less than you make and generally have a grip on your income and expenses and are achieving what you want to financially, then a budget is not a necessity for you. For everyone else, a thorough analysis of your income and expenses and budgeting toward attaining your financial goals is a necessity.
That is the gist of it!
I don’t spend the time I should on budgeting. It wouldn’t be a waste if I actually did it, followed through, and had my wife on board. I guess if money were tighter, it would be a higher priority. But some folks we know derive great benefits from their budgeting.
If that works for you stick with it.
I’m not organized enough to budget. I think the main benefit of budgeting is to make you 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 achieve 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.
I do agree that for most people, budgeting is a waste of time. I think a more practical approach is to take the money that you receive as income each month and subtract from it all of your anticipated expenses/cash outlays, and either pay the bills then or transfer the money to a high yield savings account to resist spending it.
My approach would be deduct savings first and live on the rest. The point of the article was to analyze your expenses to see if you need the product/service, can make a better choice or find a better alternative. In other words, think about how you are spending your money. After you analyze your expenses, budgets can help you achieve your long range financial goals.