When a Budget Really Isn’t
A topic frequently covered by personal finance bloggers is “budgeting.” (I’ve already commented on another dominant yet misguided topic: “How to improve your credit score.”) I read a post last week by a blogger who claimed to have a budget while saying that she hated budgeting. I think her “I hate budgeting” feeling trumped the “I have a budget” pronouncement because the numbers she reported were budget busters, both wide and deep. I’m not going to call her out by linking to her post. There isn’t much worth reading over there anyway unless you are the type that likes to stare at accident scenes.
Sorry, but operating in accordance with a budget requires more discipline than that. A decision to spend should be made in consideration of the spending limit set in your budget. If your spending is maxed out in a discretionary category, you stop sending in that category. Merely looking back at what you spent is interesting history but not financial planning.
Unfortunately, the paycheck-to-paycheck crowd are better at history than they are at planning or budgeting. If you want to mess with someone who claims to be following a budget, ask them toward the end of the month how their food and entertainment spending compares – on that day – to the amounts they budgeted for that month. If they can’t tell you with any precision, you’ve exposed them as a faux budgeter.
Mr. ToughMoneyLove is not being a hypocrite here. We don’t pretend to operate with a true budget. We have a spending plan that includes non-discretionary categories plus saving, investing for retirement, and college expenses for son number 3. Everything else fits into discretionary spending. After 32 years of marriage and no consumer debt, we pretty much have a handle on that. But that will change when we retire.
We’re already working on a retirement spending plan that will need to be a lot more rigorous. Our retirement spending plan is a long term work in progress. Right now, it mostly guides us in how we need to invest to fund our plan.
So where do you come down on this issue?