So,do you really need to do budgeting?
The answer is NO, if you possess any of the below:
A Good Sense where your money is spent
An money savvy person who has excellent control of his or her money would know where they are allocating the take home income once he/she gets it every payday.
Jotting every expenses is unnecessary, as this group of people can recall pretty precisely, at least on the most recent month, how much have been spent on groceries, transport, or whether they are paying their insurance premiums monthly or annually and the amount paid.
To them, they are seldom surprised by the balance of their credit cards or bank accounts, or that if they are surprised, they have a fool proof way of back tracing them. In other words, they are accountable for their their spending.
A Good Skill at allocating their money
Money is suppose to be fungible, meaning the money that you use to pay for your utilities can also be use to put into investment. They are made equal.
However, we need, at a lot of times be able to figure out in advance how much we have to pay for mortgages, car loan or that upcoming wedding ang pows.
If you are naturally good at this, then budgeting is of less importance.
For a lot of folks, they cannot anticipate upcoming expenses well (even though it is recurring monthly!), and ends up spending money at hand on frivolous purchases – like when they see that smartphone gadget or handbags.
It is a double whammy from here. When you are short of money to pay for important things like loan repayments, you could end up paying minimum on your credit cards (which incur high interest on outstanding) or you take personal loans, which again, charges high interest rate. This kind of consumer debt, if not managed wisely, will hurt your credit rating.
A Good System at aligning money values to how they spend
Some folks are naturally good at knowing what they want. More so, they know that they have only limited amount of money and can vary between spending more on what they value more in life and cutting down on what they placed a lower priority.
Due to that their money situation turns out to be ok.
For example, my family don’t buy branded luxury goods, so naturally we don’t walk into Coach outlets. This means, I do not need to budget for such items.
It helps a lot when you can automatically ask the question “do I need this?” or “do I need the best quality for this?” every time they buy something.
A Good Awareness of the one’s limits of willpower
For the folks that are in control of the 3 criterion above, not budgeting explicitly is an option.
However, you will realize that to be able to know where the money is going and able to compartmentalize money well, it requires much brain power.
We only have this much brain juice and studies have shown that we go through periods on and off where excessive use of willpower results in us succumbing to our usual discipline and veered off track of our financial goal.
It is also shown that we can only make a finite amount of decision daily and you are likely to take the easier option once the threshold is reached.
So if we are able to hone our willpower over time, and reduce the brainpower needed for ad hoc decision making, things will run its course. Or, with a proper planned, auto budgeting system, after a while will be so ingrained that you will not find it tedious.
You think you can improve on your personal finances in general
From my experience, the ones that are overconfident with their money are the ones which need much more improvement in their money management. The ones who are seeking advice are the ones who have mastered the basics.
Why? Ego and tend to be overconfident of our abilities. Then there are the folks that know they are in trouble, unable to keep track of where their money is going, and then there are folks that THINK they got a good handle when they actually do not.
If you possess most of the points above, you don’t need to explicitly budget. Otherwise, it will be easy to lie that you have things under control, but, if you really have a financial problem and you want to solve, you got to take this bitter pill.
A financial problem such that you do not know where your money is going, living paycheck to paycheck, always needing money to take care of last minute surprises. These are the things that, you have better not think you can shy away from tracking where your money is going for a duration.
Fix them before they go out of hand.