Want more of this? This is how to get it. Pic: iStock
Want more of this? This is how to get it. Pic: iStock

Ditch your budget to save thousands

IF LIKE me you have ever tried to lose weight, you have probably referred to some form of diet. And like me, you probably struggle to stick to it.

Every year billions of dollars are spent on weight loss programs and diet plans.

Which brings me to your budget. Just saying the word evokes tension, doesn't it?

For most, a budget is something you have been told you should have, but the thought of spending the time putting one together is stressful …

… and that's before you try to stick to it.

The arguments FOR a budget

Over the years, I have seen many arguments for using a personal budget to help you take control of your money.

Here are some of the more popular ones:

Governments and Businesses have them.

Yep, they do, and we all know how well governments go at sticking to them. That isn't the issue though.

Governments and Businesses have budgets because they have employees, in some cases many thousands of employees. These employees rely on direction to achieve their job outcomes. Without some financial constraints, governments and businesses would fail rapidly.

The ability to share elements of the budget to their employees enables them to develop strategy and plans to achieve the financial goals of the business.

The Budget is just the start

This justification is where things start to go a little off track.

The argument is that once you have created your budget, the real hard part has only just begun.

Wait, what?

You might know that not many households actually have a budget. So why is it that?

It might just be this argument for having one! The HARD work starts once you have created it.

Nobody likes hard work. If it is hard work, and you don't like the work, why would I create the budget in the first place?

That just doesn't make sense.

For me, this is the best argument for NOT having a budget, but I will come back to that point shortly.

A budget is the best way to control your money

This argument suggests that if you are prepared to spend the time to make a budget and put in the hard work, then this is the best way to take control of your money.

But is it?

For most people, a budget involves making some estimations of how much you are going to spend on all aspects of your life, normally for the next 12 months.

Given we are not able to predict the future, there are some guesses made for some items and plans for others.

Once you are done, you pat yourself on the back and acknowledge that if you stick to this budget you will, hopefully, have a surplus at the end of the year that you can choose to spend or invest. Woo-hoo!

This all supposes that you can stick to the budget. And remember, that is the HARD part.

I don't know about you, but these reasons are not really presenting a compelling case FOR a budget.

If you automatically have your bills and living expenses taken out of your every day bank account — before you even see the money — you’re much less likely to over spend.
If you automatically have your bills and living expenses taken out of your every day bank account — before you even see the money — you’re much less likely to over spend.

The argument AGAINST a budget

An important distinction to make is that I am not suggesting you do nothing to control your money. Quite the opposite as you will see.

The simple argument against a budget is that it does not assist in controlling your money.

As you read above, the process of creating the budget is just the start, the hard part is sticking to it!

The process itself of having a budget does nothing to control your money, especially if you are the type of person who has had difficulty to date managing your money.

Are you starting to see the similarity to a diet yet?

To take control of your money, you need to have a system in place that automatically allocates your money to the places it needs to go to support your financial goals.

The process itself does the HARD work for you.

This process will ensure that you meet your expenses, have money available when you need it, cover your living expenses and most importantly, allocate money to building your wealth.

By automating your money transfers, you reduce the risk of overspending on items that don't support your financial goals. It removes the temptation because you won't have the money readily available to overspend.

The process has taken care of that for you.

The process of automation is what gives you control. Something a budget on a spreadsheet, that you likely never look at, cannot do.

What it comes down to is this: you need a plan for your money, that contains a process that removes the HARD part.

Just as a diet doesn't change behaviour when you are craving that chocolate, a budget doesn't help control your money, especially when you are shopping and must have that next shiny toy.

So throw out the budget and instead move toward an automated system of money transfers to dedicated bank accounts that support your spending and investing plans.

Andrew Woodward is a mindshift.money accredited money coach based in Sydney who teaches people to take control of their money and invest for their future, simply and efficiently. Sign up for his free weekly money tips at his theinvestorsway.com.au.


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