Following a budget helps ensure that we don't rack up debt or fall behind on our savings goals, yet most Americans don't do it. Only 41% of U.S. adults have a budget, according to Wells Fargo, and in a recent LendingClub survey, 36% of Americans said they felt budgeting is too much work.
The reality, though, is that budgeting is fairly simple. All you really have to do to create a budget is list your recurring monthly expenses, factor in one-time expenses that pop up during the year (like your warehouse club membership or professional license renewal), and compare those totals to what you bring home in your paychecks. Of course, you'll then need to maintain that budget, but doing so really boils down to tracking your spending and making sure you're not going overboard, all the while accounting for changes in your expenses (like rent increases) that inevitably occur.
Still, if that sounds like too much effort for you, or it's something you're just not interested in doing, there's another option that will help you keep your finances on track: automating your savings and paying yourself first. If you're willing to do those things, you'll have an easier time letting that budget fall by the wayside.
Can saving take the place of budgeting?
Let's be clear: It's a smart idea to both automate your savings and use a budget at the same time. But if you're not willing to do the latter, upholding the former practice can help ensure that you're managing your money in a reasonably responsible fashion.
Once you have a fully loaded emergency fund (meaning enough money to cover three to six months of living expenses), your goal should be to set aside 15% to 20% (or more, if possible) of your earnings for retirement. Therefore, if you arrange to save that amount off the bat, the details of how you spend your remaining earnings become a bit less crucial.
Let's imagine you earn $60,000 a year, and you sign up to have $1,000 a month, or $12,000 a year, go directly into your employer's 401(k) plan. Assuming you already have an emergency fund, and you don't have any other things you're saving for (like a down payment on a home), then you might tell yourself you won't bother budgeting and instead use the rest of your earnings as you see fit.
That's a not-so-terrible idea in theory, provided you're able to pay all of your bills on time without running a balance on your credit card. But if you're unable to do that, then sorry, you'll need to hop on board the budgeting train.
Also, remember that budgeting can help you understand where your money is going, which, in turn, can help guide future financial decisions. If you're not currently following a budget and you're offered the chance to join some friends on a dream vacation, your first inclination might be to say no if the cost of the trip is substantial. But if you had a budget and were able to review it, you'd perhaps find that wiggle room exists to cut back on expenses temporarily to make that vacation happen.
While you can save money without a budget, the truth is that you're better off having one. And given how easy budgeting is, there's really no excuse not to give it a try.
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