Reasons (Excuses) for Not Budgeting - Lakeview Village
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Reasons (Excuses) for Not Budgeting

Reasons (Excuses) for Not Budgeting

By Emerson Hartzler, Lakeview Village Resident

After nine years of financial advisory practice, working with over 300 clients, I think I have heard every reason people don’t have a household budget. They are all excuses, of course, not reasons, but I keep this opinion to myself, not wanting to totally offend my clients before I get the opportunity to earn their trust.

First, let’s do a quick role playing exercise. You are the President of a small company, and I am the Chief Financial Officer. You ask if we are meeting our budget so far this year. I respond, “Well, we were very busy at the start of the year and did not have time to develop a budget.” “Okay,” you say, “but how are we actually doing? Are we making a profit so far this year?” I answer, “We have been super busy and have not had time to track our income and expenses, so I don’t really know.” At this point, your response should be, “You’re Fired!”

Any reasonable person would agree that a business run that way deserves to fail, yet, of the 300 clients I have served, I can count on one hand the number that already had effective systems of budgeting and reporting against a budget for their personal finances. These same people are likely to earn from $2 million to $4 million in their working lifetimes and have no idea where all that money went!

So why don’t people have a household budget and track against it? The number one reason (excuse) I hear is, “it’s too hard and takes too much time.” The truth is, it is relatively easy and takes less than 5 minutes per week! Really? Yes, really. The secret is twofold: Technology and Simplicity, two words that typically don’t hang out together.

First, let’s address simplicity. What you need to manager your monthly budget is one checking account and one savings account. Period! Most clients I meet for the first time have several checking and savings accounts and a whole wallet/purse of credit cards: A nightmare of complexity! No wonder why they think budgeting is hard – it certainly would be under such a system. No one needs even one credit card. I believe credit cards are nothing less than a curse perpetrated upon us by banks and retailers for their benefit, not ours, but that is the subject for another blog post.

Assuming you can make the transaction from credit to cash (a magical transformation in the world of personal finance) you can then effectively use technology to do most of the “heavy lifting” of budgeting and reporting. There are a number of software products available. The one I use is Mint, which has two major advantages over the competition: it is owned and maintained by the Intuit company, a big player in the accounting software business (TurboTax, Quicken, Quick Books, etc.), and it is free to the user. I especially like the free part!

Mint is an “aggregation software,” which collects into one transaction register each of the transactions from your various bank accounts (yes, it will aggregate transactions from your 10 credit cards, also, but it will end badly – just too complex, even for sophisticated software like Mint). The magic of Mint is, it places each transaction into a budget category, and while Mint’s initial selection many not be what you want, you can “train” Mint to put each vendor into a proper budget category in the future. After a few months of this the tracking of income and expenses against your budget is almost automatic. (Thus, the 5 minutes per week needed to manger your personal finances.)

I am often asked, “How do I get the information into Mint?” The answer is, “You don’t.” Mint uploads each transaction that is already there in your bank records, assigns a budget category and compiles all transactions into category totals for a monthly report, comparing the actual results against your monthly budget. Not quite Harry Potter magic, but close!

At the end of each month and the end of each year my clients know exactly where their money came from and where it went. Typically, they don’t like the answer at first, but that is the payoff from the budgeting effort. Once you know your “reality” you can make decisions that will change it for the better! That’s called managing your money – what a concept! Try it; you’ll like it!

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