Budgeting is basic. It seems like a personal finance 101 lesson, and let’s face it, book covers and marketing for budgeting guides seem more aimed at a middle schooler than you, a competent adult who somehow manages to usually have enough money for stuff.
You probably feel like you’re too advanced to need a budget. You have a retirement account! You autopay your bills! You’ve got this, right?
I know you don’t like to do it. But I’m here to tell you to sit down and do it anyway. You need a budget.
(Note: I’m not talking about the book and app of the same name, although some Lifehacker writers love and live by the You Need a Budget system.)
If you’re flying by the seat of your pants when it comes to money, let’s take a look at how not budgeting can hurt you.
Would you half-arse your health?
Say you go the doctor for your annual physical. The whole way there, you’re grumbling about it. “I don’t know why I’m bothering,” you think. “I’m healthy!”
You get to the doctor’s office, step on the scale, have your temperature taken and your blood pressure measured. The nurse didn’t show any concern about those initial metrics, so you hop off the table. “I’m good to go,” you tell them. “I’m fine.”
The nurse can’t make you stay, but they also can’t tell you what the doctor might have noticed when they looked in your nose and throat, or listened to your heart, or mashed at your belly to feel whatever organs they’re feeling.
If you leave without the full exam, you can’t be sure you’re actually healthy.
The same goes for your money. Just because you make it to your next payday with a positive balance in your checking account doesn’t mean you’re managing your money the best you can. You need to a more comprehensive view of your money to determine what’s going right, what’s going wrong, and what could be tweaked a bit to make life better.
You need to be proactive about your money
It can be hard to break down your spending by category when you’re not sure you truly want to know what you spend at restaurants or breweries in a month. Maybe looking at your childcare costs makes you sick to your stomach. Maybe seeing your monthly student loan debt payment makes you sad.
But it’s time to push through and get organised. If you don’t, your lack of awareness could come back to bite you.
Just this week, a reader commented that they painstakingly built a budget, only to find out days later that their income would be going down during the pandemic. That’s reason enough to be upset, but this person also seemed frustrated that they had to go through and adjust their budget to account for the lost income.
And look, adjusting your budget to figure out where you can cut costs in a jam is no one’s idea of a super fun evening. But this reader was lucky: They weren’t starting from scratch. Instead of staring at a blank spreadsheet, frozen with anxiety about their money, this reader had a baseline, a starting point. It was a matter of adjusting their budget, not building one from the ground up.
That’s when you really need a budget: when shit goes sideways and you need to make a plan, fast. When there’s a job loss, or an illness, or an unexpected expense, that’s not the time to sit down and say, “Today’s the day, I’m going to make a budget!” Because by then, it’s too late. By then, you’re reacting to whatever outside pressure is dictating the ways you spend your money.
If you make a budget when things are good (or at least, OK), you’re taking the proactive step to protect yourself when the unexpected does occur. You’re making a plan that makes it easier to adjust when the worst-case scenario drops in on you.
How to make a budget you don’t hate
The trick to making a budget that doesn’t gross you out is to take your mental image of what your budget looks like, and throw it away. There is not a single spreadsheet to rule them all, or a solitary method that works better than the rest.
The best budget is the one that works for you. And it may take some trial and error to find one that makes sense for your personal situation.
I recommend trying a budgeting method for no fewer than three months to get a solid sense for whether it fits into your lifestyle.
A few options to get you started
The 50/20/30 method: You put your expenses into three main groups: Essentials (50%), financial goals like savings or debt payoff (20%), and discretionary expenses (30%).
The 60/40 method: You allocate 60% of your money toward the essentials, and 40% toward everything else, including savings goals.
The kakeibo method: You group spending into four categories: Survival, extra, optional, and culture. What goes into which category? Deciding for yourself is half the fun with this method.
The zero-based budget: You give every single dollar a job and strive to have $0 leftover/unaccounted for art the end of the month.
If you want to try one of these budget styles, you can search online for templates that make tracking the maths a bit easier.
If you make a budget with an app, you’ll focus less on the budgeting method and more on the day-to-day monitoring of your spending. (App lovers, share your favourites in the comments for readers looking for their first budgeting app!)
Stick with it
Here’s the other thing you need to remember about making a budget: You’re going to mess up.
I guarantee it. You’ll forget that you only pay for car insurance twice a year until that big payment approaches, or you’ll forget to categorise the kids’ piano lessons.
That’s fine. Because a budget isn’t something you set and forget. It’s something you nurture over time. You’ll make adjustments, you’ll make a copy of your current budget to run through a few scenarios, you’ll get a raise and need to allocate those funds wisely.
And you won’t just want to plow ahead into the next month—a smart budgeter reviews the previous month to see what worked and what didn’t as they look ahead to the next month.
It’s all about being proactive, and if you’re checking in with your money at least monthly, you’re well on your way to financial health.