OK, there’s no doubt about it: the financially dead do NOT keep budgets and do NOT control their spending, so you are definitely better off by following the Three Step Plan to budgeting simply explained in this video:
1. Have a Goal
2. Make a Plan (i.e. your budget)
3. Keep Track of every dime that you spend.
Simple!
Except, that it won’t make you rich …
… because you can’t save your way to wealth.
So, here is the Patented 7million7year 3 Step Plan To Budgeting Your Way To Wealth:
1. Work out what wealth means to you: i.e. find Your Number and Your Date
2. Choose your required Growth Engine
[hint: it will have a lot more to do with increasing income than it does to do with controlling expenses]
3. Do the No Budget Budget … once … that’s it!
Which method do you prefer?
I agree wholeheartedly that you cannot budget your way to wealth, but it certainly helps for Making Money 101 and Making Money 301.
It forces you to examine what you are spending (wasting) money on, ensures that you are living within our means, and more importantly, should help you free up money that you can use for investing (be it in a business, real estate, or your poker lessons for your plan to win the World Poker Tour).
If your goal is to make wealth and you need capital, then you make sure that is being accounted for appropriately. Pay yourself first.
As someone who has used personal financial software for 15+ years, I’d actually recommend using something like Mint (www.mint.com) to track your spending and see where the money is going. The one problem it only supports monthly budgeting.
@ Neil – I agree with everything that you say; in fact my message can be easily confused, so here it is in a nutshell:
“you cannot budget your way to wealth” [DOES NOT EQUAL] “do not budget”
…. instead, it means: don’t rely on budgeting/saving ONLY to get you to your Number; unless you are one of the lucky few who wants to live in an ashram eating rice … or, the modern western equivalent: retiring on the typical retirement ‘pension’ @ age 65 🙂