Who Needs A Budget?

There are a number of excuses for ignoring the  concept of budgeting for one's own personal finances. Budgeting has a poor reputation. It's not fun, it's time-consuming, it's depressing.

While budgeting can be one of the most important steps for beginning a  journey towards financial independence, there's a tendency to ignore this in favor of jumping into the stock market, saving for retirement, paying off debt, or even prescribing to the belief that owning a house is big positive step. These are certainly all good things to do, but understanding how much money you have coming in and where that money needs to go is basic knowledge that can help you better determine how you can invest, save, and pay off debt.

There is no way you can take on the responsibility of owning a home without a working knowledge of your income and expenses.

The ideas preventing people from starting a budgets are generally psychological or emotional, and not based on a lack of knowledge. Adults generally grasp the concept that you can only spend more than you have and that breaking this rule will have damaging long-term consequences. In shorter time frames, it's harder to see these consequences. After all, you can sustain living on credit cards for some time, but eventually, you'll have to pay the money back or face dire financial problems setting you back years. And just because someone can grasp the concept of additional and subtraction - the only necessary mathematics for budgeting - doesn't mean they're ready to consciously apply it to their own finances.

Getting over these psychological barriers is the first step, and that's not going to come with more knowledge about a topic. There are some tricks to overcoming psychological barriers that I'll write about in the future.

I often see budgets missing certain important categories, which indicates that even once people begin the process of tracking, predicting, and controlling their income and expenses, there are some holes in the plan that could end up damaging financial progress as much as neglecting the process of budgeting.