money health weekly


Awareness: A Better Way to Budget

Popular author, speaker, blogger, and columnist Carl Richards describes budgeting as being boring but important. Much like flossing. It's not fun to talk about, and it's really not fun to do, but if we don't do it our gums are going to bleed all over the place. Well, the bleeding gums thing is my addition to the analogy...

The problems is that, even though it's important, it's not really understood exactly what it means to be a budgeter.

What Is Budgeting?

Strictly speaking, budgeting is typically known as a way to allot a specific amount of money to a specific purpose. For example, you could specify you only want to spend $100 on lunches this month, and you would try to get as close to $100 as possible. More generally, though, when we talk about budgeting in the world of personal finance, we are usually talking about ways to cut our spending.

It's very easy for marketers and advertisers to trick us into buying things. It often doesn't feel good when we know we shouldn't spend all of our money each month, but we do anyway. This is why we flock to self-help books to try and learn an easy way to get our spending under control. Unfortunately, most of the time these defensive techniques that we learn don't work in the long run.

Here are some of the methods you may have heard of:

  • Track every penny you spend and don't allow yourself to go over in each category

  • Stop using credit and debit cards and go back to using just cash

  • Use just cash, but put the cash into different envelopes each earmarked for different categories

  • Stop going to the coffee shop

  • Put your credit cards in ice

This is just a partial list. You may have even tried one or more of these; I certainly have.

Does It Work?