A super article from JD Roth (normally of Get Rich Slowly), guest-posting over at Zen Habits: 10 Essential Money Skills for a Bad Economy. He covers a wide range of good practices, like checking your credit score, opting out of junk mail, streamlining your bank accounts, and — tra la! — budgeting! (And he mentions PearBudget!)
The only critiques I have of his article are that 1) I’d put “Set Financial Goals” higher on the list (the article isn’t ordered, per se, but, to me, ‘further up on the list’ equals ‘more important,’ and I think goals are absolutely critical), and 2) I’d note that expense tracking is a key part of keeping a budget (he splits them into two discrete aspects of personal finance).
Not to nerd out too much, but on that second point (the expense tracking and budget-keeping thing), here’s my take on it:
A budget is made up of three components:
- a (categorized) spending plan (the future!)
- a (categorized) list of expenses (the past!)
- a statement of what’s currently available (again, by category) (the present!)
Often, when people talk about “making a budget,” they’re only referencing that first (future) element (the spending plan). Making a spending plan’s great. It’s essential.
But unless that spending plan informs your daily spending decisions, it’s not going to be terribly useful. And unless you incorporate 1) expense tracking and 2) a statement of where you stand within each category, there’s no way that your spending plan can inform your daily decisions. And, indeed, you’ll probably give up “budgeting” in frustration. I know I would (and have!).
The takeaway: A budget is more than just a spending plan. And unless you incorporate the other two pieces of the puzzle, you’re setting yourself up for failure. At PearBudget, we want you to know and love the freedom that comes from creating — and keeping — a successful budget.
Anyway, even with my budget nerd quibbles, JD’s post is great, and you should absolutely check it out: 10 Essential Money Skills for a Bad Economy. And, if you don’t know Get Rich Slowly, you should go check it out, too.