There's a 50/50 chance you use a budget to run your household finances.
I know that because a recent Pew Research Center survey found that 49% of all adults keep a formal budget. The rest of us don't.
Interestingly, a rough 50/50 split persists across all the demographic boundaries that surveys like these tend to scrutinize. It almost doesn't matter whether you're a man or woman, white or black, more educated or less educated, rich or poor. Maybe someday scientists will discover that half of us carry a budgeting gene that attracts its carriers to spreadsheets and calculators.
In the meantime, we can merely puzzle over why we're so evenly split over this budgeting habit. In my humble opinion, this survey reveals some good news -- many of us have taken control of our financial lives by getting a handle on our day-to-day and month-to-month expenses.
Does that mean the other half of us must start budgeting to map our way toward monthly financial bliss, or else be doomed to a life of financial chaos? Certainly, people who do budget know about its many advantages:
- Laying out your monthly spending helps you know where you're going, making sure you don't run out of cash at the end of the month before you run out of expenses.
- Tracking your spending means you have a good tool to find and fix your bad spending habits, those nagging little expenditures that can add up to quite a bit in a month.
- Using a budget often means you've made sure your savings goals get priority in your spending plan, so you may be more likely to have healthy retirement and emergency savings accounts.
- Keeping a detailed budget allows you to impress your friends with a truly dizzying recitation of your annual spending trends on things like shoes, laundry detergent, and paper towels -- certain to spice up any boring party conversation.
But the fact that half of us may not be naturally inclined to budget doesn't necessarily mean we're doomed to a life of financial anarchy.
You may be the enviable type who can keep all these numbers in your head, always having an approximate idea of your monthly credit card expenditures and the amount of money in your checking account. If that's true, you may not need a budget because you have a natural tendency to keep everything in balance. Don't be surprised if telling your friends and neighbors about this skill garners you a few hostile looks.
That's because, among those for whom budgeting does not come naturally, the possibility that it could be an automatic skill makes us cringe with envy. To make things worse, the idea of spending the kind of time and effort on tracking dollars and cents that a budget can require sounds like about as much fun as an IRS audit. (No offense to the IRS, of course.)
If you're not inclined to budget, or if you have no idea where to start, try some of these warm-up exercises. They'll help you get a better handle on your spending without committing you to detailed and daily financial accounting. Maybe they'll even entice you to try this whole budgeting thing on for size.
- Look over your past spending. This can be especially easy if you tend to use the same debit card or credit card for every purchase. Do a rough tally to see how you spent your money over the last month or two. Anything surprising? Limit your budgeting to just those areas that you feel may be getting out of hand.
- Limit your spending with cash. If you don't want to track every penny and save every receipt, put a lid on some of your spending by only using cash. Know that when the cash runs out, your monthly budget has run dry. This can be particularly useful for things like dining out and other non-essential purchases.
- Track only your cash. This can be useful if you're the type who always wonders what happened to the $60 you got from the ATM machine just a few days ago. Write down or keep receipts for your cash expenditures alone and figure out where that money disappears.
- Start with dessert. You might be more inclined to budget if you have a reason, especially if that reason means you can buy yourself a reward. If you've been dying for an iPod or some other new gadget, start paying closer attention to your spending and save your extra dollars for that reward. Suddenly, watching your dollars and cents may not seem like such a drag.
If you want to dive into the world of budgeting, we've got a budgeting discussion board dedicated to that very topic. You can also get a head start by reading some of these other Foolish articles: