A budget. *yawn*. How boring can you get? Seriously, you NEED a budget. Trust me, I’ve spent the last 5 years since college (my god, has it really been that long?) doing pretty much everything but making a budget. Some of those years I was plenty irresponsible with my money (impulsive spending, ignoring my loans, lots of eating out). Other years, I was the epitome of responsibility (helping pay for my wife’s grad school, soaking my own beans, putting money into a Roth IRA). And let’s be serious. I freaking married responsibility incarnate. Still, without a budget, I was missing something, a very serious something.
What gets measured gets managed
Peter Drucker, the famous business thinker, once said that whatever we measure will then get managed. Without a budget, you’re really not measuring anything. Zilch, nada. A budget’s power lies in its all probing eye. Want to know why sitting down to create a budget is so terrifying? Because you have no clue where all your money goes, that’s why.
And you’ll never know until you take a stab at your first budget. You’ll most likely fall short on the first attempt, overestimating how much you need for gas, or cutting yourself short on lunch money. That’s ok, though, because you’re now measuring what you spend, where it all goes and how it adds up. You’ll take that first month’s guess and then you’ll refine it. And then you’ll refine it again. Before you know it you’ll have an amazing, functioning budget that allows you to project out future expenses and, more importantly, see where all your money currently goes.
A Season of Epiphany
I certainly learned a lot from our first budget. I was blown away by how much we spent on groceries and eating out. Since we live in DC, viewing our rent as a portion of our income was a sobering exercise. But of all this, a budget creates a conversation, a dialogue between yourself and your money. Now, every month, we sit down and look at what we spent versus what we thought we would spend. If we went over in a category, we can adjust our future expectations, or we can reduce our spending.
Why the big fuss?
A budget is the cornerstone of your financial house. It may not be that exciting on its own, but a good foundation allows you to move on to fun things like saving for travel, signing up for awesome credit card bonuses, or even buying a house.
There are amazing things to be done with money. But first you need a budget.
In my next post, I’ll go into a couple ways to budget and a few helpful tools for doing so.