Demystifying The Budget – Don’t Be Afraid

by The Happy Rock on May 10, 2008


I am not sure many other finance terms inspire more fear than the word ‘BUDGET’. Ok, well maybe bankruptcy, foreclosure, and a few others, but you get the point. Some people even will physically squirm when they think about having to adhere to a budget.

I am here to squelch some of those fears and I am not even a fervent budgeter. A budget is nothing more than a plan for your money. That’s it! There isn’t anything magical, nothing scary, no straight jacket, just a plan.

Here is the formal definition :

Budget : a scheme or method of acting, doing, or making developed in advance

That captures what a budget it beautifully. You decide were your money should go before you spend. You can be objective and rational about were you money is going, rather than being ‘forced’ into decisions at the cashier’s counter. You also have a metric to help keep you accountability and give you feedback on how your spending is proceeding. Just, list your all your bills, debt, and goals like savings and divide up your monthly take home pay between the categories however you see fit.

One of the big concerns people have is that it will take the joy out of spending and turn them into a cheap miser, but the only way that will happen is if you let it. You are free to budget however you want. If you want to spend $500 a month on movies and eating out, by all means. I think what most people realize when they start to budget and track their spending is that you have more money than you think, or at least it will feel like you have more money.

Another concern is that you will miss something or not budget enough money. I am hear to tell you that a budget is a continual process. You will make mistakes. You will blow the budget, but with each mistake you will be able to budget better and better. Adjust and tweak is the name of the game.

So don’t be afraid, be willing to try it for a few months.  Here is an online budget calculator from Crown Financial that will help provide a little context.

{ 3 comments… read them below or add one }

Dorian Wales - The Personal Financier May 10, 2008 at 3:46 pm

I believe keeping a budget is the most basic form of household financial planning and is absolutely necessary.

I believe that most household, preparing their first budgets, will realize they earn much less than they think and spend much more.


The Conscious Snob May 11, 2008 at 7:33 pm

I love budgeting! I started doing it in January when I realized I was in debt and didn’t want to be anymore. Sticking to a budget helped me cut out costs I didn’t have to spend, and purchase only what I needed. So in less than five months, I got out of debt. I budget more loosely now, as I developed a frugal habit from strict budgeting earlier. Thanks for the post!


Gloria July 2, 2008 at 10:02 am

Budgeting is the very thing that helps me to save my money


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