Budget. The mere mention of the word makes people cringe, gnash their teeth, bang their head against the wall, or slump in their chair. When I ask workshop participants who comes to mind when they think of a budget, I get responses like The Grinch, Scrooge, and Dwight from “The Office.” One person even said, “the devil.”
So universally disdained is this pitiful personal finance tool that many financial writers play an odd dance of trying to distance themselves from budgets while at the same time teaching people how to use one.
In his book, “The Automatic Millionaire,” David Bach tells readers to “take those budgets you’ve been struggling with and throw them in the garbage. If you really want to budget your expenses, that’s your business, but I think it’s a waste of time and effort.” And yet, in his “Finish Rich Workbook” he teaches readers to estimate and then track what they spend. He also acknowledges using Quicken to track his own household’s spending.
In the classic money management book, “Your Money or Your Life,” Joe Dominguez and Vicki Robin write, “Don’t worry. This program is not about budgeting!” They then proceed to teach readers how to track their spending “down to the penny.” How is this different from budgeting? They explain that their approach is “based on consciousness, fulfillment and choice, not on budgeting or deprivation.” Ah, I’m glad we cleared that up!
I’ve long been a believer in the much-maligned budget. In fact, I think it’s the single most powerful tool for successful money management. I’ve tried to tell people it might be ugly, but this mutt will scare away debt and help guide you down a trail of building savings and spending smart.
Mostly, these words have fallen on deaf ears. Even telling people that one of the finest personal finance books ever written, The Millionaire Next Door, revealed that over half of all millionaire households use a budget to guide their finances, didn’t generate much interest. It’s too much work, people said. It seems like a hassle.
Finally, a Little Love
But at last something has awoken people’s inner budgeter. It’s the same something that has suddenly turned so many people into savers. The Great Recession.
National surveys I commissioned from the market research firm Synovate – one in 2006 and one just recently – shows a dramatic increase in the number of people claiming to use a budget.
In 2006, 47 percent of people said they used a detailed or general plan for their household’s income and expenses. This year, that figure jumped to 80 percent.
When asked specifically how the recession has impacted their use of a budget, 38 percent of previous non-budgeters said the recession has prompted them to begin using one, and 53 percent of people who were using a budget before the recession said the economic downturn has prompted them to begin tracking their finances more closely.
One of the most surprising findings from this new research is how few budgeters use online budget tools like Mint.com, which have been generating lots of buzz. Of all people who said they use a budget, just 3 percent said they use an online budget tool. The most popular budget gear? Paper and pencil.
Obedience School Coming Soon
Now that more people are showing some interest in using a budget, I plan to write more about how to set up and use one in the weeks ahead. With the New Year just around the corner, right now is the perfect time to get this dog housebroken.
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What about you? How has the recession impacted your use of a budget? If you’re a recent budget convert, how’s it going so far? What’s been the most difficult part? What has turned out to be easier than you thought? Or, if you’re still resisting the use of a budget, what’s holding you back? If you’ve been a long-time budget user, what would you say to a non-budgeter to motivate them to give it a try?