• Tuesday, March 05, 2024
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BusinessDay

When do you not need a budget?

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How many of you actually track your spending and keep up with a budget?

A fair share of the emails that arrive at my inbox are budget related. Usually, it’s from those people who don’t want to start one, or ones who claim that they don’t need one. They’re looking for someone to tell them that there’s no need to track their spending. That they can get a free pass because of their unique circumstances.

 As far as I am concerned, there are only two types of people who have no use for a budget.

The Person Who Pay Themselves First

 If you have a regular income and set your finances up so you automatically send part of your pay check into retirement, taxable and short term savings accounts, you likely don’t need a budget.

 Could you use one? Sure, because you are likely able to put more away if you know where it’s going. But you don’t need one if you are putting away a significant portion of your income for the future.

The Responsible Spending Also Don’t Need One

 If you make very good income and your expenses are very low comparatively, you also don’t need a budget. You are likely not maximising the mileage of your money, but you can afford to. I know someone who makes 7 figures a year, but spend less than $100,000 annually. Cutting out taxes and every other obligation, he is still looking at an extremely healthy retirement. Could he think of ways to turn that $100,000 worth of expenses into $80,000? Or could he try to get even more bang for his $100,000 bucks? The answer is likely yes, but doing either would not materially change his life one bit. He can afford to be relaxed about his spending habits.

 In his case, I’d also give him a free pass.

Could You Afford to Change Your Budget?

 The bottom line is this. The need for a budget has nothing to do with your income nor your expenses separately. Just because you earn $250,000 a year doesn’t mean you can skip the budget, and living on $1,000 a month don’t grant you that free pass either. Look at what you are left with each month. If you are saving at a comfortable level for the future, the pass is yours. Take it if you want.  If however, you: want to save more without earning more. wonder where your money goes each month.   are motivated to have a healthier financial life regardless of where you are at currently.

 Then by all means, start a budget. Enter those numbers regularly and use what you already have to your advantage. Entering those totals really isn’t hard, and it takes less than five minutes of your day.