Things have been tight lately. The other day I went to the store knowing I only had $17 left for the week. Milk, grapes, cat food and two bananas later, the checkout operator’s telling me the total is $19.
Um, better make that one banana.
Yeah, nanas are expensive at the moment. And it’s still raining.
Anyway, if you were to ask me that day how our finances were going I would have replied in the negative. They suck. We’re stuck in the mire, or worse, moving backwards.
But how accurate are our gut feelings?
I have written in the past about how I’m a fan of real data, metrics, numbers, aka budgeting. I wouldn’t have believed it if someone told me years ago that I would say this, but here it goes: there’s a beauty and a little thrill in numerical data.
So what does our budget tell us?
It turns out, despite our perception that things are going poorly, we’re actually up for the year. The last of our credit card debt from our new hot water system is paid off, our mortgage is lower than the start of the year, our savings have increased by $50 (better than decreased at least), our investment has increased ever so slightly and we continue to contribute a few dollars to it every month.
The actual numbers tell a different story to our feelings. And we’re heading in the other direction than we thought we were.
Of course, it could have been the other way round. Things could have been worse than what we thought. But knowing that now and taking steps to rectify the situation is better than going forth blindly and not knowing until our situation became drastic. And of course, we can use our budget to single out areas to cut back.
There are a lot of personal finance writers who claim that you don’t need to keep a budget. Budgeting is unpopular and I think some writers tell people what they want to hear. I disagree, especially if money is tight, or if you have specific savings goals. Budgeting or understanding what you do with your money is important. It is empowering, it is encouraging and in some cases, relieving (I was relieved at least). Budgeting to me isn’t about writing down a few numbers and trying in vain to stick to an artificial system. Life doesn’t work like that. A budget is a tool to manage your money, and it comes in all sorts of shapes and sizes.
I prefer an excel spreadsheet, but you don’t need excel to keep a budget. You can write it down, you can automate it, you can use the old envelope system. The important thing is using a system that helps you understand your money, what position you’re in financially, and whether you’re heading towards achieving your financial goals. It is a tool that has to work for you.