Do You Budget?

If you do, then what’s the reason for you to budget?

I don’t and I don’t know whether that’s a problem for me or not.

There were several years in the 90s when I wrote every penny I spent in notebooks, not to better plan how to spend my money next month, but to know where it went :) I kept that habits for about five years and somehow it never transformed into a habit of budgeting :(

The main reason of not have a budget is that, after all these years, I feel I can self-control my spending without relying on hard numbers to tell me how much I should spend.

  • I don’t have the urge to spend money: I have no fancy toys like iPod, iPhone, or Wii game console.
  • For most of the workdays, I almost don’t spend any money: the $40 cash I have in my wallet can last weeks.
  • I always hear suggestions like using cash instead of credit cards to avoid/reduce debt, but I am doing just the opposite: I use credit cards to pay everything, from $2 postage to $4,000 car payment.
  • Most importantly, saving and investing always come before spending: every month, we invest in our savings accounts, investment accounts, college savings accounts, and retirement accounts automatically, and all the bills are paid on time.

From the way I spent money, I consider myself frugal, though not frugal enough to know where every dollar went.

Last night, I took a look at how we spent our money since July 2006 when I started to track our credit card balance every month. The reason for doing so is to see whether lacking of budgeting/planing has made us spending more than we should have, one way to prove that budgeting isn’t always necessary.

creditcard_balance.png

Above is our monthly credit card balances from July 2006 to March 2008, ranging from $1,300 a month to more than $3,500. It’s not a long history, but the patter is quite clear: we spent a lot more during the holiday season (November, December and January) than other months of year. Except last summer when we had some one-time expenses (for example, we paid nearly $600 medical bills in June, spent $960 on car maintenance in July, and paid $560 car insurance in August), most of our credit card bills are below $2,000/month. And if I do a year-over-year comparison, our average monthly spending from July 2007 to March 2008 is about $100 more than the same period one year ago (excluding the one-time expenses mentioned above (red line in the figure))! And I can blame the rising food and fuel prices for that $100 increase. Of course, the addition of our second child last spring also contributed.

I never had a budget and I really don’t think I need one!

Do you need a budget?

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5 Responses to “Do You Budget?”

  1. No Debt Plan |  May 05, 2008 at 4:25 pm

    We have a monthly budget that I track and update once per week.

    To answer your “Why?” question: because planning and sticking to a plan greatly increase your chances of reaching your goals. It also helps us see where we make mistakes, and can then correct them.

    It isn’t a strict, “must stick to every penny” budget. We use our AMEX Blue Cash card for 99% of purchases, so if the grocery bill is $56 this week instead of $55, we spend the $56 and cut back the next week.

  2. Sun |  May 06, 2008 at 12:27 am

    No Debt Plan: Thanks for sharing your experience.

    I found the most difficult part of budgeting is have a plan and stick to it. Yes, both “have a plan” and “stick to it” are not easy. Though I use credit card to pay almost all purchases as well, I found it’s hard to figure out how much we are going to spend next week. Often times, I don’t know how much each item costs and how much I have spent, though by looking at the gross number, I know we didn’t overspend or underspend too much from week to week. But still there’s room for improvement. I admit I am not a good planner in how to spend our money :(

  3. Harei |  Jun 08, 2008 at 8:23 pm

    For your information, there is a great little online personal budgeting website that is totally free and truly anonymous. It lets you open your private budget account with just your e-mail and asks nothing more from you.

    You are immediately given a great looking, easy to use straight forward budget page, and you can also generate monthly reports to your e-mail for safe keeping before end-of-month closing and starting a new month. The budget categories are not user modifiable but the set is very rich and flexible covering just about any practical category plus a few catch all miscellaneous category, not a bad deal for a free utility. And there is an instant super easy to use online users billboard that holds discussions among users and the developer too.

    The website is at:
    http://www.myexp.org/OOTD_gate.php

    Happy budgeting.