Use a budget

It was swimming around my head like a mantra last week: follow your budget, follow your budget! As I tested this very common financial tip for Money Myth Busters, I came too close to becoming unglued. I couldn’t make it work.

It felt like my gym membership. I bought gym shoes, gym clothes, an MP3 player so I could focus on something else aside from my complaining muscles while on the treadmill. I will lose 10 pounds before you know it, I chortled to my husband. Before I knew it, my excitement lost steam.

I already tried this last year. Somewhere in the maze of zeroes and ones in my computer is an excel file that recorded my budget and actual spending for February, March, then half of April. Started again in August, halfheartedly did it in September and threw up my hands in despair in October.

I told myself that just because it’s hard to do doesn’t mean I shouldn’t do it. Every expert says budgeting is the most important part of personal finance. It is the foundation. It is the mother lode of all personal finance gold mines. Has anybody ever been financially successful even if they didn’t use a budget? I wonder if Bill Gates and Warren Buffet use a budget? Henry Sy and the Ayala brothers?

For me, this tip is so busted. Just the word “budgeting” sounds so painful. Plus, even if you make a foolproof budget, what use will it be if you don’t track your spending? I can just imagine myself after I check out of the grocery. “Did I pay P35 for that loaf of bread or P35.50? Or was it P35.75?” Gives me an ache at the back of my neck. And some people even use sophisticated software for budgeting!

Would it really matter where I put every centavo if I make sure that for every P100 peso I earn, I give P10 for tithing, then save and invest P25? As long as I pay all my bills and househelp’s salaries, settle all credit cards in full every month and have a little bit of fun money set aside for the kids, maybe I can give that excel file some rest? Then if I have extra, I may add that to my mutual fund. That has got to save me the aggravation of tracking every peso and centavo that I spend, which really sucks out the joy in doing things. “Hey everyone, let’s watch a movie this weekend! Ooops that will cost P1,000.”

Having said that let me stress that this tip is not totally busted. If you keep wondering at the end of the month where your money went but have a hazy recollection that you went to the spa, bought an expensive gift for a friend who’s migrating and that’s all, you seriously need to keep track of your spending pattern.

If you are trying to trim some fat in your finances so that you can save more, or you honestly have no idea where you are financially and want to start being responsible for your financial future – taking a look at your expenses is crucial.

However, I still believe that you don’t really have to track down every peso. Round it up if it makes it easier to stick to your routine. That way, you’ll even get a nice surprise at the end of the month finding more money than you thought you had.

Keep it simple and more importantly — fast! If things don’t add up or go as you planned, don’t feel guilty! It’s your money. You decide what to do with it. If you want, call it a spending plan rather than a budget. Yeah, its the same but its sounds better, doesn’t it?

Ok, I’m expecting some virtual crucifixion from the personal finance experts now. Let the comments begin (dodging).

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