The Plans of the Diligent

For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.

The plans of the diligent lead to profit as surely as haste leads to poverty. Proverbs 21:5

Ok, so if "plans" lead to profit, what does "plan" mean in financial terms? You got it -- having a budget.

This was my pastor's recent comment -- that you couldn't be successful financially without at least a simple budget. I have to agree (though I would say you need more planning than just a budget, but that's for another post.)

I had a budget for years and years. In my 20's, I developed a budget annually and updated it monthly. In my early 30's, I developed a budget annually and updated it quarterly. In my late 30's, I developed a budget annually and updated it semi-annually -- then moved to annual updates. And now that I'm in my 40's, I've gotten to the point where I don't use a budget.

I do track my spending the same way I've done for most of my life (through Quicken), but I don't go back over the expenses as much on a regular basis. That's the reward for years and years of budgeting -- that you eventually get to the place where you don't need to do it any longer, and yet your spending remains under control and you make progress in growing your net worth (FYI, I do look over my Quicken spending categories regularly to make sure they aren't getting out of whack.)

How about you -- do you budget?

For more budgeting tips, see It's Budgeting Time of the Year.

Comments

[bettis]

in my experience, alot of people view a budget as very restricting - a tool that keeps you from having fun. i think that is a one-side view. as a person that faults on the thrifty side of finance, at times, my budget allows me to spend without any underlying guilt and as a christian, enjoy God's blessings.

regardless of how committed you are to submitting to your budget, tracking your expenses provides a finger on the pulse of your financial health. even if you are habitually blowing your budget, you at least you can identify your trouble categories.

that being said, i think budgeting is a critical necessity in my personal finances. I use mint.com as my monthly budgeting tool. by using mint.com and a debit card, my budget tracking is incredibly low maintenance. i simply jump on mint's website every few days to monitor my progress.

["Mo" Money]

I use Quicken, it is easy to use and one can quickly find areas that need attention. I have found as situations change the budget or spending plan needs to have changes made to it.

[Success Professor]

I use a loose budget. I keep track of what comes in, record all of the payments that are required - for example mortgage, utilities, monthly giving etc... Then the remainder I divide into two sections: 1. Budget for all other spending - this includes groceries, entertainment and anything unexpected. 2. Debt reduction or savings - all the rest of the money goes to paying off debt or saving depending on our particular goals at the time.

It took me a little time to find the appropriate amounts for section 1, but now that I have it works very well. I know that if I spend more on entertainment then I need to save somewhere else. If something unexpected comes up that takes some of that money then I need to spend less (or nothing) on anything else. This provides a strict budget with flexibility to move the spending around within it.

[Matt at Steadfast Finances]

I'm in my early 30s and I keep a mental budget only, but I do update a spreadsheet each month to track my personal expenses. I would estimate that if you do this for a number of years, you fall into a spending mode that you begin to feel comfortable with, but it also becomes a lifestyle habit where your spending frugality becomes a subconscious habit.

I save > 50% of my take home anyway, so if I vary a few percent from month to month I don't worry about it.

[Mary]

I keep careful track of all my expenses. Sometimes knowing that I have to go home and write down an expense is enough to keep me from incurring it. I currently only "budget" grocery expenses since this is where I discovered that I was spending a little too freely.

[kitty]

Only in my head. Barring major expenses,I have over 50% left of my take home - slightly less during property tax months - and that after max 401K contribution. I also earn over 100K and have a paid off mortgage, so even if I spend a little extra here and there I wouldn't have any trouble paying it off.

I've never budgeted even when I still had mortgage and the margin between my expenses and income was smaller. Yet somehow I've always kept my spending below my income. The percentage I saved varied depending on circumstances, but I've always had money left at the end of the month after I paid my bills.

Maybe it was because I am a first-generation immigrant and value money enough to think before spending it. Or maybe because my needs have never quite caught up with salary increases. Sure I travel and can splurge occasionally, but always within reasonable limits. I am also a bit indecisive: sometimes I think and think and still cannot quite decide to buy something I think I want.

Interestingly, most of first-generation immigrants I know don't budget yet don't overspend. Do we just value money more than Americans? Or maybe it is just my generation (youngest of the baby boomers)?

[Shan]

I started out years ago just using MS Money. I don't like its budgeting functionality so I started using the budgeting software on MyTotalMoneyMakeOver.com and it's working great, but I still use Money to keep my accounts balanced and track net worth.

I can't imagine not budgeting since I've been doing it so long, but I wouldn't complain if I got to that point someday!

[Walden]

I keep a VERY detailed monthly budget and have done so for the last 2.5 years. I'm getting married next weekend and have put together a budget including debt reduction (fiance's student loans) and goals for our future. It was a bit of a shock to future hubby! But having a budget and tracking my expenses has allowed me to remain debt free (except for the mortgage) AND save up a good amount of cash! Hopefully in the future we will have enough money to not track every little thing every month, but that's a long way off, plus I really like entering things in EXCEL (nerd alert!!!)

[MasterPo]

Keeping track of spending helps a lot and a budget is definately a good tool.

But more and more I'm finding that life is throwing me too many curves to be so ridged. I bust the budget often and it hurts but I can't see any way to prevent it.

[Rich]

When my wife and I first started I developed a budget. It was restrictive in the beginning, but for the purpose of saving money to do fun things like vacation. As an incentive, I matched every dollar saved using coupons for her "mad" money. This was a windfall. Not every woman finds this acceptable, everyone is motivated differently. The most important thing that a budget has done for us is accept flexibility. This is important when the furnace goes or the car breaks down. It is very acceptable to tighten the belt for a month or so to pay for those expenses. Tightening the belt may be no eating out, no movies, delay those new clothes etc. In otherwords, we make personal sacrifices to our lifestyle to pay for life's unexpected expenses. After 25 yrs of marriage we no longer have a formal budget. What I monitor is cash flow, just like a business. Major expenses are planned, for unplanned major expenses there is an emergency fund. We are now in our accummulation stage of life and all the extra cash goes to retirement savings. It is so tempting to get a new car, buy the beach house etc, but we don't. We have developed a comfortable lifestyle that is practical for us.
For an example of flexibility, I recently loss my job, got 6 months of severance and secured another job in six weeks with more money. We cut back immediately, no eating out, no movies, cut back driving (gas prices helped), shopped for deals on what we needed etc. When I looked at all our expenses and did a cash flow analysis I could have stretched the severance to one year. I still have all the severance, put it in a money market account waiting to invest at the right time. The increase salary is going to pay down my mortgage allowing me to be mortgage free in 12 yrs instead of 20. Just in time for retirement.
Trust me we do make bad financial decisions, the take away, we don't repeat them.
Bottom line, budgeting early created the financial discipline that has allowed us to get through the bumps in the road as we go through life. And we still have alot of fun, beach for week every year, long weekends in NYC ($$$$, ouch!), eat out once a month at a nice resturant.

[Minister Mamie L. Pack]

I completely agree that having a plan and budget is important as well as teaching the young to do so. With our eldest son he receives an allowance. Of his allowance, he is required to tithe, save, and give an offering. The rest is his to spend. We show him how to compare when shopping for a particular item, etc. Teaching them young helps them to move in wisdom.

[WD Favour]

A very simple and straightforward piece!
It might not be easy for folks to understand the fact that you don't need to budget anymore. But the truth is that it's the beauty of habit - that you get to the point where you don't have to do it consciously. You are now on auto pilot.
I personally started to budget when I was 21 and I'm 34 today. I'm well over my millions in personal finance and I honestly attribute that primarily to what you are sharing in this article - budgeting...plans of the diligent.
I came across this article, by the way, at a Christian blog Carnival.

Keep up the good work.

[headknocker]

A budget is key to winning financially; especially for couples. When you both agree on how your money will be spent, it eliminates a lot of stress and conflict. The extra layer or accountability will also help curb the impulse spending that seems to derail most families.