Fool.com: The Joy of Budgeting (Fribble) July 5, 2000

Fribble The Joy of Budgeting

By James Scott (jls@stl-online.net)
July 5, 2000

The following classic Fribble originally ran on November 10, 1998.

Hey, Fool, can you tell me how much you spent on groceries last month? How about movie tickets, or gas for the ol' rustbucket? If you can't, you're probably missing out on one of the biggest joys of living Foolishly: following a budget.

No sarcasm here — when I say joy, I mean it. A budget is not the ball and chain some make it out to be. On the contrary, it allows you to take control of your spending. Once you establish your budget and track your expenses for a month or two, you begin to see where you spend money foolishly (note that small f, friends). "Whoa, $200 a month for lunches?" you may ask yourself. "I can do better than that." And so you will, now that you know you're throwing that much money at the local Burg-O-Rama. Or you may decide that's a perfectly reasonable amount to spend on nosh, but the $100 you spent on dry cleaning is way too extravagant. Either way, you can't trim the fat from your spending until you know where it is. Ignorance might be blissful, but it's also expensive.

Budgeting has one more benefit: it gives you the ability to plan ahead. You make conscious decisions about how to spend your money, and you don't let unexpected expenses force you to tap your savings or carry a credit card balance. If your car registration is due (so soon?) maybe you could brown-bag the lunch a couple of days to make up for it. Perhaps you overran your entertainment budget — no sweat, just skip a haircut or forego your customary pound of shrimp at the supermarket. It's relatively painless once you have the budgetary habit. [Editor's note: Fools the land over share their budgeting tips on our Living Below Your Means message board.]

Of course, you can start tracking your expenses any time, but the beginning of a month is the most convenient time to start your budget. All you really need is a pencil and a scrap of paper. If you're so inclined, there's a whole hard-drive full of software out there to help you set your budget and track your expenses and budgeting calculators to help you play with the numbers. Yes, your first month's budget will probably be a wild guess, but don't let that deter you. Your first month's results will tell you where you need to make changes. And once you have a year's worth of data on your spending habits, you can start making really sharp estimates.

Don't pass up this opportunity to focus your financial resources on what is really important to you. It's well worth the small time investment.