Budget can be liberating

Your Money

February 18, 2007|By Gregory Karp | Gregory Karp,Morning Call

If a household budget were a person, who would it be? Scrooge, the Grinch, Darth Vader?

Those are responses Matt Bell receives when he asks the question while teaching personal finance seminars.

"One person said, `My mother-in-law,' and I don't think he meant that favorably," said Bell, who writes personal finance newsletters and maintains the Web site Moneypurposejoy.com.

Bell, of Riverside, Ill., says budgets get a bad rap. "I think if a budget were a person, it would be Rodney Dangerfield because he never got any respect, and I don't think budgets do either."

The Internet is full of information on household budgeting, and plenty of sites offer free budget worksheets to print out or to download to use with a spreadsheet program.

So, there is plenty of information on "how to" do a budget, but not a whole lot of "why to."

About 13 percent of people, just 1 in 8, use a detailed, written spending plan, according a survey of 1,000 people by market research company Synovate.

And that's a shame. According to a study of 30 people commissioned by Bell and completed by Quester Corp., a qualitative research company, more than twice as many budgeters as non-budgeters interviewed said they felt confident about achieving their financial goals.

Here are some notions about budgets that might inspire you to try one:

A budget is about having more.

"Many people think a budget is something you `go on,' like a diet," Bell said. "People think of it as a ball and chain, as tightening the belt, cutting back, reining in your spending. Nobody is motivated by any of that."

But a budget can be about having more - more knowledge, more efficiency and ultimately more money for things that really matter.

In fact, you might even find money for something you love that you didn't think you could afford, which really casts budgeting in a positive light. Maybe it's quitting a job and staying home with kids, buying a home, completing a house improvement, buying a big-screen TV or vacationing in Europe.

You are in control.

If you love cars and want to spend more on your vehicle, that's a choice you can make. That is, if you can structure your spending so you can afford it.

"That's a really important point for people," Bell said. "There's not a one-size-fits-all. There's not only one right answer. Let's find out what's important to you, and see where you can adjust over time to allow for that, without going deeply into debt."

People often say they feel out of control with their money. It's impossible to feel out of control if you have a budget. If the budget isn't reflecting your real spending or your real priorities, you can change it.

Think about who uses budgets.

The book The Millionaire Next Door reported that more than half of millionaires use a household budget. "A lot of millionaires are business owners, and they wouldn't dare run their businesses" without a budget, Bell said.

Consider the many professional people who would get fired for not adhering to their company's departmental budget but haven't created one for their home finances.

Forget the details and math.

At first, don't worry about the mechanics and what percentage of income you should spend on different categories, such as transportation or food. Instead, keep track of where your money is going.

It's not time-consuming.

"It really only takes a couple of minutes each day to jot down what you're spending, and then at the end of the month to total it up in various categories," Bell said. And while some budgeting software, such as Quicken and Microsoft Money, will do that for you, more than half of detailed budgeters in the Synovate survey used paper and pencil.

About a quarter used an electronic spreadsheet program, such as Excel. "It's really pretty easy stuff," Bell said.

Budgets show how little things are big.

You probably know how much you spent on your last car and how much your house cost. But do you have instant recall on how much you spend on lunches at work each year? Totaling smaller expenses in a budget allows you to see how expensive your phone services really are, for example, or how a reduction of just 10 percent on food shopping could save hundreds of dollars.

Budgets provide peace of mind.

A budget is not confining; it's liberating. "If you've got a plan to spend $75 at the grocery store, you have complete freedom to spend that full amount and not worry about upsetting the apple cart in some other area of your life," Bell said.

More peace of mind about money could even lead to lower stress levels and even a better marriage or relationship.

"A budget helps us know where we are and helps us get to where we're going," Bell said.

In Quester's interviews of non-budgeters, two people said they resisted budgets because "you have to think before you buy." There's no arguing with that. But that's a good thing.

A few examples of budget forms available online include www.consumercredit.com/budget-sheet.htm; the Microsoft Excel Web site, www.office.microsoft.com (click the tab "Templates"), and www.moneypurposejoy.com.

yourmoney@tribune.com

Gregory Karp writes for The Morning Call in Allentown, Pa.

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