Plan for your money don’t budget

Plan for your money don’t budget

Budgeting is a bad word and if you are budgeting in the traditional way you will fail. Instead, you should plan for your money. So what is the difference?

When you budget

A traditional budget, when you say you will spend no more than £500 on grocery next month and no more than £50 on takeout this month you are setting yourself up to fail. This style of budgeting is called forecasting in the financial world and you will never hit your forecast perfectly.

There are plenty of apps and spreadsheet templates online that will encourage you to budget this way. There are even books and gurus on the subject of budgeting this way, but this way is flawed.

It only takes failing to meet your perfect budget 2 or 3 months in a row and you give up budgeting telling yourself "I can't budget".

When you plan

Planning your money is a better way because plans change. Let's say you have £1000 of income this month (keeping the numbers simple) and you know you need to spend the following:

Budget Example Table

Now we have a plan for your available money what happens when you spend £80 on takeout instead of the planned £50. We start by telling ourselves it's ok, life happens and then we, simply, updating the plan taking £30 off the grocery category to cover the extra takeout and we are back on plan and feeling good with ourselves.

Conclusion

Understanding this plan for your money will change how you see money and will have you saving money in the long term. This idea is not new I have just written out my interpretation of You Need a Budget's core principle: give every dollar a job. You Need a Budget or YNAB for short is the fantastic budgeting application I have been using for 3 years now.

When you plan for your money you stress less and don't have the heartache of breaking the budget yet again. It is only a small change in thinking but it makes a massive difference to you sticking with your budget.