Standard advice from most financial planners is that it’s essential to create a budget to track all expenses.  It’s the best way to figure out where your money is going and to rein in any unnecessary spending.

5 Reasons to budget

  1. It helps you gain control of your finances.
  2. It helps you to achieve your goals by spending on the things you love the most.
  3. Documenting your purchases allows you to keep tabs on where your money is going and help you identify leaks.
  4. It helps you avoid debt by making the necessary adjustments to stop spending beyond your means.
  5. What you measure, you can improve.

Having a plan can improve your relationships because you and your family know where you are going financially.

I don’t budget

I’ll come clean right now and admit that I don’t use a budget.

Oh, I’ve tried.  I’ve used Microsoft Money and then Quicken.  For several weeks I recorded every expense from my mortgage payment to every cup of coffee and gas fill up.

Related: How to build a better personal budget

I soon resented it.  It was tedious to record all the minutia of my day-to-day spending.  I started to procrastinate and became weeks, and even months, behind in my recording.  Then, because I couldn’t remember where the money went, I just plugged in the numbers to meet my monthly targets.  After a few months I gave up.

My “budgeting” method

This is now my budgeting strategy.

I know how much my fixed expenses are, and this amount goes into my chequing account.  At the beginning of each year I calculate my variable expenses – usually annual payments such as insurance and taxes – and divide the total into 12 monthly payments.  This amount goes into savings account.  I don’t use a separate account for each item.

I don’t spend much on discretionary expenses like clothing or eating out, but when I do it goes on my credit card which is paid monthly.  I have my own acceptable monthly limit that is well under the card’s limit.  I know what I can afford.

I keep a high interest savings account topped up to manage unexpected expenses, such as a new tire when my husband ran over a nail, an extra property tax payment because my lawyer made an error, and a spur of the moment weekend excursion.

Related: Why it’s hard to avoid buying “stuff”

I actually am very financially minded.  I have a decent retirement account, I pay all my bills on time and I don’t spend frivolously.

I’m doing just fine without a formal budget, thank you very much.

Final thoughts

For some people the mere mention of the “B” work brings on resistance.  Many don’t look at their budget frequently enough to shape their behaviour.

You can build your spending around musts – rent or mortgage payment, utilities, and food; shoulds – savings and investments; and wants – vacations, gifts and entertaining; and still meet your goals without being chained to a budget and having to account for every penny.


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