The real reason you should be budgeting

Here's one thing I learned about myself, when I don't have a plan then minor setbacks can derail me emotionally.

I start to get down on myself for not doing more and I feel like I might fall further behind or fail to achieve a goal.

But in reality I have no idea. Minor setbacks rarely result in complete failure. I'm in my own head.

Budgeting is important but not because of the numbers -- it's about psychology. Understand yourself and you can understand your money.When does progress look like a straight line? NEVER.

If I need to go 500 miles in 100 days, a minor setback won't affect me if the larger goal is still on schedule. If my plan is five miles a day, I know I'll need to be around 50 miles through at the end of day ten. On the good days, maybe I do 10 miles. On bad days, only two. The plan helps keep me mentally checked in when my brain wants to check out after a bad two-mile day.

That's the gift of budgeting. Too many people view it as a financial straight jacket. It's not! It's a plan to help you achieve your financial goals.

And like all plans, it'll be tested.

As the great philosopher-poet pugilist Mike Tyson once said – “Everyone has a plan 'til they get punched in the mouth.” Don't let your budgeting strategy get punched in the mouth.

Life will punch your budget in the mouth. Your car will break down, your kids will get sick, and your emergency fund will be stress tested.

But the budget keeps you sane. It keeps your head screwed on straight and in the game. And it keeps you from beating yourself.

How do you budget? Do you use a tool like Mint or one of it's many alternatives? I prefer Personal Capital (see our review of it) because it tracks our investments too.

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About Jim Wang

Jim Wang is a forty-something father of four who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and farms in Illinois, Louisiana, and California through AcreTrader.

Recently, he's invested in a few pieces of art on Masterworks too.

>> Read more articles by Jim

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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  1. Millennial Moola says

    How can the average family save for anything big without a budget? If you want to pay cash for a car, the only way is setting up weekly savings from your paycheck to afford the upfront payment.

  2. Kate @ Cashville Skyline says

    Totally agree, Jim! One of the worst feelings is having no idea where your money is going every month — especially when it’s time to make a major life decision like changing jobs, moving, or trying to purchase your first home.

  3. Matt Warnert says

    I loved the line about the great philosopher poet pugilist Mike Tyson. I almost choked on my coffee after reading that one. Great writing!

    Budgeting and tracking that budget has always been about awareness for me. Using your mileage example, I know if I have to hustle to catch up tomorrow or whether I can slow down and enjoy journey.

  4. Our Next Life says

    We have definitely failed at the typical monthly budget enough times to know it’s not for us, and so I used to think that made us anti-budget. I think the biggest thing I’ve realized recently is that our pay-ourselves-first-and-live-off-the-rest strategy is still a budget, it’s just a different kind of budget. We don’t have line items, but we are constraining our spending and focusing on saving big amounts, which is pretty much the exact definition of a budget! And like you said, we focus on the big picture goals. Some months we crush it and save more than we planned, and other months our spending is higher and we save less. But stay focused on our goals for the year to know how we’re doing overall — and, actually, that makes me realize that the biggest way we do budget is for saving. Is a “savings budget” a thing?? πŸ˜‰

  5. Gary @ Super Saving Tips says

    When I get punched in the mouth, I still feel terrible, but I remind myself that this is what I prepared for. The last few months I’ve been “underspending” my budget and it feels great, but I know that any month now, it’s going to balance out and that’s ok.

  6. Catherine Alford says

    We tend to go in spurts of success and setbacks too. Sometimes I feel great because the day went perfectly and then there are days like today when my kids act up and things don’t go as planned at all. It’s like that with finances too.

    • Jim says

      On a day to day basis, that line for growth is jagged. When you take the 30,000 foot view, it all smooths out. The key is to avoid getting down on yourself in the meanwhile as long as the trend is upward!

  7. Julie@ChooseBetterLife says

    Great points. The longer we budget, the better we get at it and the fewer “surprises” and “emergencies” there are. For example, we don’t know what specific home or car repairs will come up, but we do know that some will be needed, so we budget for these categories.

    • Jim says

      Exactly, preparation can really help when it comes to navigating those expenses and the first step is making sure you have a nice cushion, however big or small it is.

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