61% of people don’t have a budget…. Do you?
I have tried to personally budget on numerous occasions. I have tried excel spreadsheets, Quicken and other software. I hate budgeting, most people I know also hate it as it’s pretty boring and can lead to some uncomfortable conversations both of which we tend to avoid. The trouble I have is how to budget the lumpy items, the cash and the one-offs. Given these hurdles I often give up.
When people come to me with questions about investing, those questions, irrespective of the net-worth of the client, always lead to budgets. How we manage our overall financial lives directly affects our ability to invest but we tend to confuse the order. We assume we can build a financial plan without the foundation of a budget.
If you don’t know how much you save on a regular basis then how can you measure if you are making progress?
I think budgeting freaks people out as we are not comfortable with the order. We think budgeting locks us in to something, but what if things change (as they always do)? Here’s the reality: budgeting creates a valuable framework for our future financial decisions. This is a framework not a sword of Damocles hanging over us.
Things will change and we will need to adapt. The point is that if we haven’t bothered to figure out where we are then we are wasting a lot of time guessing about where we could go.
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