I Made a Budget, Now What?
I often use my blog space to talk about the importance of not only creating, but also sticking to a financial budget as a means of staying on top of your debt. Wealth manager, Russell Bailyn claims to dispense the same advice to deaf ears on a daily basis. In his recent blog post, Russell ponders a very interesting question; who’s really following a budget? It’s a pretty good question and the answer may surprise you. From his blog:
My most common experience when creating budgets has been that more money exists than one realizes. On paper, it seems near impossible that a shortfall could exist. It’s the casual discussion afterwards when the “oh yes, I’m addicted to downloading music†and “I needed those sunglasses†comments come out.
This morning I’ve come to a new realization: Most people will probably never follow a budget. While we’re on the topic–budgets are annoying! They make you feel like you don’t earn enough money and they force you to scrutinize how often you cut your hair and buy a scratch-off lottery ticket. So, my plan is to begin a new approach. When someone asks me to help them create a budget, I’m going to ask “why?â€
Most people don’t follow the budget anyway, so we may as well try to find some other solution. Perhaps an investment program can be tweaked to create more income. Perhaps try transferring some of those stocks into bonds or a savings account which can provide a stream of monthly income. Or, some people need to take a closer look at their W-4 (tax withholding) form and use that as a budgeting tool. If you’re on a salary and get a tax refund every year, you’re effectively letting the IRS hold your money for you–and they don’t pay you any interest for it.
Russell says if you’re having trouble with the budget, their may be more realistic solutions than simply itemizing your expenses from month to month. Think about how and when you earn money. Think about how and when you spend money. Consider how your taxes get paid and whether you could put a better strategy to work. Think about your savings plan too. Is your current allocation (stocks/bonds) the way it should be? Best of luck to all on this never ending and often frustrating task.
The entire post can be read here.
